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17 May

How To Attack Your Debt

“Debt can be effectively tackled through strategic planning and disciplined financial management.”

If you’re going to attack your debt, you need to map out what you owe and how much you’re currently paying each month. You may have different types of debt, such as student loans, a bank line of credit, or a store credit card.

Debt Plan

If you’ve got multiple debts, it can be easy to forget how much you owe, the different interest rates, and how much you pay into each debt each month.

The problem is that when you don’t know exactly what you owe and how much it’s costing you, you can feel overwhelmed, frustrated, and disorganized, reinforcing your worst fears that you are bad with money.

What you need to do is map out all of your debt. Mapping it out will organize you and make you feel more in control. Make a list of all your debts on paper, and make four columns.

The first column will be a list of all the names of your debts (ex., personal loan, line of credit, credit loan, student loan). In the next column, write the amount owing, the next column, interest rate, and the last column, the minimum payment.

Debt	Amount owing	Interest Rate	MinimumPayment
Personal loan	$3,500	5.60%	$70
Line of credit	$10,000	4.00%	$35
Student loan	$5,350	19.99%	$160
credit card	$12,000	18%	$360

Not only do you see the total amount of what you owe, but you’ll also be able to calculate the monthly minimum payment. It’s what you must pay towards your various monthly loans, whether you like it or not.

Now, when you add your debt, it comes out to $30,850, and your minimum payments, when added together, total $625.00.

The point of mapping it like this is to ensure you know exactly what your starting point is and the amount of money you must pay each month, versus the amount you choose to pay. That‘s where the magic happens.

Seeing and acknowledging it makes it real. And that’s the power of the Debt map! Taking stock of and organizing it is important to creating a sustainable, realistic Debt Plan.

You need to know your outstanding amount, the interest you’re paying, and your total monthly minimum payment. Knowing these things will give you control.
It’s a relief to know exactly where you stand so you can face it and take action on paying it.

How To Create Your Debt Map

Step 1: Make a list of all your debts.

Step 2: Confirm the exact amount owed for each account.

Step 3: Confirm the minimum payment for each debt.

Step 4: Confirm the day of the month your payment is due to avoid missing a payment.

Step 5: Organize all this information in a debt map grid so you can see it in one spot.

Step 6: Prioritize your debt by interest rates with the highest first.

Step 7: Calculate your total debt.

Step 8: Calculate your total monthly minimum payment.

Now that you’ve drawn your Debt Map, you must calculate how much your daily life costs. Only then can you calculate what you can put towards debt in addition to the monthly minimum payment.

Getting out of debt requires strategic planning, budgeting, and disciplined financial habits. Below are a few more helpful steps to better control your financial matters.

- Assess Your Debt: List all your debts, including the outstanding balance, interest rates, and minimum monthly payments. This comprehensive overview will give you a clear picture of your financial situation.

- Create a Budget: Develop a realistic budget that outlines your monthly income and all necessary expenses. Allocate a portion of your income to debt repayment, ensuring you have sufficient funds for essential living costs.

- Cut Unnecessary Expenses: Identify and cut non-essential expenses from your budget. It can include dining out, subscriptions, and impulse purchases. Redirect the money saved towards your debt repayment.

- Prioritize High-Interest Debt: Focus on paying off high-interest debts first. Allocate extra funds towards the debt with the highest interest rate while making minimum payments on other debts. This strategy minimizes the overall interest paid.

- Consider Debt Consolidation: Explore options such as a consolidation loan or a balance transfer credit card. Consolidating multiple debts into a single, lower-interest payment can simplify repayment and reduce overall debt burden.

- Negotiate Lower Interest Rates: Contact your creditors and work with them to negotiate lower interest rates. A lower interest rate can significantly reduce the overall cost of repaying your debt.

- Build an Emergency Fund: Create a savings account to cover unexpected expenses. A financial buffer can help prevent you from relying on credit cards or loans during emergencies, thereby reducing your debt.

- Generate Additional Income: Explore opportunities to increase your income, such as taking on a part-time job, freelancing, or starting a side hustle. The extra income can be directed towards repaying the debt.

- Snowball or Avalanche Method: Choose a repayment strategy that suits your preferences. The snowball method involves paying off the smallest debt first and then using that momentum to tackle more significant debts. The avalanche method focuses on paying off the debt with the highest interest rate first.

- Seek Professional Advice: Consult a credit counselling agency or financial advisor for personalized guidance. They can help you create a repayment plan, negotiate with creditors, and provide valuable financial education.

- Avoid Taking on New Debt: Resist the temptation to take on new debt while repaying existing obligations. Shred or limit the use of credit cards to emergencies to prevent further accumulation.

- Sell Unnecessary Assets: Consider selling unused or unnecessary assets to generate additional funds for repayment. This could include items like electronics, furniture, or clothing.

- Track Your Progress: Regularly monitor your repayment progress to stay on track. Celebrate small victories and stay motivated by visualizing your journey toward achieving debt freedom.

- Educate Yourself: Invest time in financial education to improve your money management skills. Understanding personal finance principles can empower you to make good decisions and avoid future debt.

- Stay Persistent: Paying off debt is a gradual process that requires persistence. Stay committed to your repayment plan, and remember that small, consistent efforts add up over time.

Getting out of debt is a challenging yet achievable goal that requires careful planning and a strong commitment. Tailor these steps to your specific situation and seek professional advice if needed.