A lot of people are getting into debt because of the ever-changing lifestyle. Also, the desire to keep families together and happy is getting some of them into debts. Besides, mortgages, car loans, and credit card debts are contributing to the rising debt. Also, couples that are starting families find themselves accumulating more debts to meet their needs. A survey carried out in the United States found that people aged between 25-34 years old carry a debt of about $42,000. It excludes car and mortgage debts. As such, it forces the victims to delay making some life milestones like getting married or buying a house. In this article, we look at how you can reduce your debt at Lending Bee.
- Track your monthly cash flow
Before you start paying your debts, the first thing you will need to do is to look at your monthly cash flow. It will give you an idea about where your money goes. Once it is done, you will need to cut out spontaneous spending. It frees your money and allows you to start paying your debts.
- Identify a high-interest debt and focus on paying it
When you make minimum payments towards interest-earning debts, you will take longer before you settle it. The best thing to do is to make a big payment each month. This should be continued until the debt is fully settled. In the meantime, ensure you make minimum payment in your effort to settle other accounts that are due. Once you pay off the high-interest debt, it will allow you to focus on some other obligations. It should be done consistently until all the debts are cleared.
- Pay the smaller debt first.
The only way you can grow your assets is by reducing your debts to zero. It allows saving more and making investments.
So, where do you start if you are in debt?
The best way to go about this is to start by paying the smaller debts first. After it is fully paid, it encourages you to pick the next smaller debt and start making payment. A fully paid debt gives you a sense of accomplishment. But if you have any other liability that is earning interest, ensure to make the minimum payment.
- Get some money from your retirement fund.
In some cases, you may need to get money from your retirement scheme and use it to pay your debt. But you will need to meet some requirements, including age limits. Even though you can still withdraw some money but face a penalty. The penalty you face will depend on the account you want to get the money from. If you are a member of a work-sponsored scheme, you may be eligible to borrow some money from the scheme.
Of course, there are many other methods you can use to reduce your debt levels. But starting with those that attract the highest interest could help you save money. Alternatively, you can start by paying the smaller debts first. This way, you will see the progress and get encouraged to pay more debts.