How to Pay Down Your Debt- Part 1
This is a tough topic, as many Americans experience debt and are burdened by endless bills and high interest payments. In fact, according to the Motley Fool, the average American has $7360 in revolving debt. But thankfully, there are resources and strategies you can use to pay down your debt – no matter how big or small – in a systematic way.
Here are some tips we recommend:
1.) Know What You’ve Got (and What You Don’t) – The most important step in any kind of money management is to know how your cash flow is working. I’ve found the easiest way to manage this is to just use a spreadsheet – there are also many software applications available that simplify this (Mint.Com, Budgt, Spendee). Until you know exactly how much you’re spending and how much you’re making (and what’s coming due) you can’t make a good action plan.
2.) Negotiate With Your Creditors – It’s best whenever possible to keep in touch with your creditors about your ability to pay and to be proactive. Rather than just letting a payment slide, call first and discuss your options with your credit card company or other creditor. It’s always worth a try to discuss lowering monthly payments or working out some kind of schedule – and it’s better than leaving them in dark.
3.) Pay Attention to Interest Rates – If you have more than one credit card to pay off, start with the one that has the highest interest rate, as this will save you money in the long run. And don’t forget to continue paying at least the minimum on your other cards. Speaking of which…
4.) Make a Habit of Paying More than the Minimum – Paying the minimum is what the card companies want you to do – it prolongs the whole ordeal for you, and makes them more money on the interest. Any extra amount you can afford to tack on top of the minimum (ie. consider foregoing the coffee shop coffee, bring your lunch to work instead of buying, etc.) will save you that much and more over time. You future self you will thank you.5.) Don’t Be Afraid to Get Help – You don’t have to have Warren Buffet money to use a financial advisor. Many are very affordable (most fees are a calculated percentage of your managed assets) and having their expertise available can save you from costly mistakes. The Women’s Choice Award does an extensive screening of their financial advisors based on 17 criteria – you can find our recommendations here and even search by state: Women’s Choice Award Financial Advisors & Firms
Author: Emily Smalter Emily is currently enrolled in a Master's of Social Work program at Kansas University. Outside of her schoolwork, Emily advocates for women to have a stronger voice in both the public and private realm, and spends her spare hours writing on how to make the seemingly smaller tasks in our lives more manageable.