If you’re struggling to pull yourself out of credit card debt, are knee-deep into your student loans, or are looking to get informed on how to steer clear of mortgage debt before signing up, we’ve got just the thing for you. Below, we’ve put together three practical and effective tips to help you avoid and eliminate consumer debt woes.
1. Get Financial Literate
First things first- learn about money. Whether you’re just now looking to take out a loan or are already indebted, you must understand how the credit world works. Sign up for an online finance crash course or talk to a financial analyst/ accountant to stay adequately informed about smart credit and spending.
2. Create A Payment Plan
Are you planning to tackle existing credit or apply for that auto loan? Don’t dive in head first. Take some time to assess your finances and devise a feasible payment plan to cater to that loan. Experts advise consumers with existing credit to bump their regular payments to speed up the process or create a secondary income stream to lessen the financial strain of recurring payments. For the consumer looking to get initiated into consumer debt, it is advisable to start saving up at least six months’ worth of revenue before taking out the loan.
3. Have An Emergency Fund
Finally, set up an emergency fund account to steer clear of consumer debt. Once you have that up, commit to contributing a small amount of money each month to help you cover those emergencies that will pop up along the way. Remember, the emergency account is entirely different from your regular savings account, so it’s best to only lean on it during extreme cases. A budgeting app like YNAB can help you differentiate the two as you take steps to build your emergency plan.
Bottom Line
So many of us are in debt and don’t even realize it. We become accustomed to making the minimum payment on our credit cards and other loans, not realizing that we’re only digging ourselves deeper into a hole. If you’re struggling with consumer debt, it’s time to take control and get out from under the weight of all that interest. Follow the three steps outlined above – get financially literate, create a payment plan, and make sure you have an emergency fund – and start your journey to getting rid of your consumer debt. You’ll be glad you did!