Financial Debt can be an awful trap if not planned well. Paying your minimum debt every month and not worrying about it is usually not the best plan of action. It is always important to never ever delay a loan re-payment. During a loan tenure, or while your credit card usage is significant, it becomes very important to plan out early pay-off strategies so that any unforeseen emergencies don’t render you financially helpless. The basic rule of thumb is: Pay off your debt as soon as you can.
Here are a few steps to follow when planning an optimized way to pay off your loan and/or credit card debts:
Calculate Total Debt
The most obvious first step is to list out how much money you owe and to whom. Make sure you also take into account the duration of your loan amount, and the amount of interest that is levied on the amount. Make this list in the order of priorities, considering the tax amount, or the total payable sum. You should ideally pay off high interest debts first, but on the other hand it might also be beneficial to finish off the lesser loans.
Once you know how much amount you have to pay back and in how much time, it will give you a good perspective to move on to the next step.
Determine Monthly Pay
The next step is to make a monthly budget of your regular livelihood expenses. Include food, rent, travel, medicals and everything that comes in the realm of your basic needs. The funds that remain after you subtract your budget expenses from your total cash inflow become your basic savings. Keeping aside at least 10% of this amount, divide the remains into paying your high interest loans off. This is an important step as it helps you determine your capacity to pay off your loans in the shortest time possible.
Strategize And Schedule
Once you are clear about your debt/loan priorities, and the monthly amount you can allocate to paying off each one of those, it is time to fix the dates and start putting the plan into action. Keeping in mind all the dues, schedule reminders to pay off your debts one by one.
All this planning helps a lot in reducing the anxiety which usually surrounds people’s minds when they are about to go into a downward debt spiral. Always remember; thinking your strategy through is only half the work. The real effort that helps you is finally acting according to your plan, with discipline.
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