4 Tips for Paying Down Debt
Student loans, a mortgage, car payments. We expect to see debt in our lifetime. However, debt should be temporary, not a lifelong payment. Making these adjustments can help set you on the right track to becoming debt-free.
Create a budget
It can be difficult to think about paying off loans if you have not yet managed to create a realistic budget – and adhere to it. Whether you use an Excel spreadsheet or a budgeting app, getting the numbers physically in front of you will help you visualize your spending. List all of your living expenses, along with their due dates, and compare this to your take home income. Understanding how much money you have left after paying necessary expenses is essential to the next step.
Form a repayment plan
Consider how much you owe. Decide whether you will tackle debt with the Snowball Method or Avalanche Method. The Snowball Method involves paying off your smallest debts first, reducing your overall number of debts quickly. The Avalanche Method revolves around interest rates, attacking the highest first.
Once you have chosen your technique, get your monthly expenditures plugged into your budget. If at all possible, always pay more than the minimum required payment. When doing this, allocating additional payment according to your preferred method.
Stop using credit cards
Continuing to use credit cards when attempting to pay off debt can become counterproductive. Switching your spending to debit-only transactions helps you see your charges in real time and keeps you from adding to your debt. Another method to consider is allowing yourself to only use cash on hand. Take out a set amount at the beginning of the week and do not allow yourself to exceed it. This process requires mindfulness and helps you avoid unnecessary spending, which helps you stick to that budget.
Having a difficult time? Physically remove them from your wallet.
See a financial advisor
If these steps are not coming naturally to you, a financial advisor could help. The more complicated finances become, the more useful a professional can be.
Once you have a plan in place, it is time to tackle the next steps in financial growth. This includes retirement plans and investments, both of which your financial advisor can guide you in. At Goodman Financial, we embrace our role as a fiduciary by offering clients financial planning services as a complement to our investment advisory services.