Debt does have a place in this world and it’s not always a negative thing. If managed correctly, you can actually use debt to your advantage. However, not everyone has a lump sum set aside for emergency expenses or large purchases, and many people resort to using credit cards or taking out loans for both unexpected and expected expenses.
As you may be fully aware, debt becomes a problem when you are unable to keep up with the monthly payments.
If you are overwhelmed by a significant amount of debt, it can be a major point of frustration in your life and wreak havoc on your finances. No matter how bad your financial situation is, know you’re not alone. Debt and financial stress seems to be the American way.
Luckily, there’s a way out if you’re willing to buckle down and change your financial habits. To help you cope with this financial difficulty, here are some of the things you can do when you’re struggling with debt repayments.
Cut Down Non-Essential Spending
It’s hard to manage your debts when your entire financial situation is out of control. When juggling payments for multiple debts become too much, it’s time to take a hard look at your spending habits. A monthly budget is your secret weapon to take control of your money and set yourself up to get out of this mess.
A budget plan helps you manage your money, and it’s the key to getting out of debt. However, when your spending habits don’t match up with your income, your budget is bound to fail. Take a serious look at what you spend your money on each month and what you should probably cut out of your monthly routine.
Your primary goal should be to pay off your debts without compromising your basic needs. While you’re still in debt, it’s more practical to give up the non-essentials like your monthly Netflix or Spotify subscription and other entertainment expenses. By doing this, you’ll have a larger amount to spare for your debt.
Draw On Your Savings
If you have an emergency fund that’s equal to or greater than your debt, it’s time to get out of debt and replenish your fund. Missing payments on high-interest debts can lead to further financial problems. It makes more sense to use your savings to repay your debts on time rather than piling up more high interest on your credit cards or loans.
However, don’t use all your savings to pay off debts. Keep some as your emergency fund and continue building it up. It’s also important to note that relying on your savings to make debt repayments is not always a good idea. When an emergency expense arises and you don’t have extra cash, you may need to borrow more, leading to more debt.
Consolidate Your Debts
Having multiple sources of debt can be pretty overwhelming. With a bunch of different debts with various due dates and interest rates, it can be difficult to manage. Chances are you’re going to incur late or missed payments, which will result in more interest and debt that snowballs out of control. If you don’t want this to happen, you can opt for a debt consolidation loan.
By consolidating your debts, you can make repayments more manageable. You only have to keep up with one monthly payment instead of juggling multiple debts with different due dates and minimum payments. It’s worth pointing out that debt consolidation doesn’t erase your original debt, but combines them into one loan to a single lender.
Moreover, you’ll be paying a lower interest rate if you roll your debts into one, helping you save money in the long run. It can also reduce stress since you would only have to deal with one creditor.
Reach Out To Your Creditors
When you’ve done everything you can on your own and you still find it hard to keep up with payments, reaching out to your creditors is another great option. You might be more relieved once you negotiate with your creditors directly and work out a debt settlement. In fact, you must contact them right away if you’re starting to have trouble with payments to avoid significant damage to your credit report.
Don’t wait to make a late or missed payment before you reach out to your creditors. If you’re struggling to make payments for a situation out of your control, such as an illness, unemployment, or a pandemic, they may be willing to renegotiate the terms of your debt. You may be able to reduce or temporarily suspend your payments, depending on your negotiation.
Seek Out Debt Advice
When struggling with multiple debts becomes a cycle in your financial life, consolidating them and contacting your creditors may only be a temporary solution. It wouldn’t hurt to seek advice from a debt management expert to help you pay off debts and manage your finances.
A great first step is to sign up for my newsletter to start receiving weekly tips to help you get out of debt and start building wealth.
Many people are not sure how to pay off debt, and that’s where a mentor can step in and help. Financial coaches, such as myself, can help you create a plan to take control of your money rather than allowing your money to control you. A financial coach will help you find the right plan to manage or clear your debts, and they also advise on how to build financial habits that work for you rather than against you.
Struggling with debt payments is both stressful and frustrating. Fortunately, there is always a way out as long as you are determined to change your bad financial habits and take control of your life. It will take short-term sacrifices, focus, and determination but it’s possible to change your life.
For more information, feel free to reach out to me at firstname.lastname@example.org