The Mindset Of Being Debt Laden
Debt can be a heavy burden.
No one enjoys being debt-laden because carrying a debt leads to feelings of stress anxiety.
Sometimes, however, taking on debt is a reasonable decision to make, if the debt can be managed over time. For example, taking out a loan for college and paying off the debt for years after you graduate makes sense, if you can use your degree to get a higher-paying job.
Most people need a car to commute to work, and you may take on debt to buy a home. A manageable level of debt can make financial sense over the long term. It’s when these debts spiral out of control that you should begin to worry and try to switch up your overall approach to how you handle debt.
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There is a mindset that often goes with debt spiraling out of control. You can take steps to avoid a debt spiral, however, and improve your situation.
Are You Hiding?
In the interest of simply living a normal life, some people are tempted to hide from their debt problems until a final demand letter for payment shows up.
Don’t let it get to this point. If you’re debt-laden, try to address the problem head on and minimize the impact on your life. With hard work, you can reduce your debt, increase your credit rating, and have more peace of mind.
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Luckily, each step you make towards resolving the situation will help. Creditors like it when you contact them immediately, even if you can’t pay, as it shows a willingness to co-operate and that you have the debt prioritized.
If you have too many debts to prioritize, you might consider secured debt consolidation loans from Evolution Money, as this can often help you combine all of your payments into a manageable monthly payment.
Bit By Bit
When stretched across multiple debtors, it can be tempting to pay a little to each, based on what you can afford. Say, for example, that you have five debtors. You can benefit from making a larger monthly payment on at least one debt until it is paid off- then move on to another debt that’s owed.
A larger monthly payment always beats small incremental progress in financial terms, especially when it comes to paying debts. A creditor will earn less in total interest if you can pay down a particular debt faster. Once one debt is paid off, move on to the next loan balance with the highest interest rate.
Why Budgeting is Critical
In order to free up dollars to make a larger payment on one particular debt, you need to create a personal budget and look at your monthly spending. Separate your spending into fixed categories (such as your home mortgage or lease payment) and variable spending, including entertainment and dining.
Take a close look at your variable spending and make some cuts. Instead of going to a movie three times a month, cut back to once a month. Consider taking lunch to work, rather than going out a buying food.
When you free up dollars, you can make larger payments on a debt, pay it off- and move on to another loan balance. Use this strategy to get out of the debt mindset, and improve your finances.
This post is for educational purposes only.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
Co-Founder: accountinged.com
(email) ken@stltest.net
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