If you want a life that is as free from issues as possible you need to learn how to manage your loans and credit cards effectively. Doing so means that you do not end up owing more than you can afford to pay and fall behind in your payments.
The average American has $38,000 worth of debt, excluding mortgages. If you are one of these people, there is nothing wrong with having some debt, as long as you can manage your loans and other debt in the right way. Anything from using credit cards to taking out a bank loan is okay as long as it does not become a cause of stress and serious problems. In order to keep your debt from complicating your life, you need to understand how to manage it.
Know how much you owe
The easiest way to complicate your life with the debt problem is to lose track of how much you owe. If you do this you can end up borrowing more than you can afford to repay.
You need to keep a list of all your debts. In this list you should include creditor details, the amount of debt, the amount of the regular repayment and the date on which payments are due.
It’s important to keep this list up to date. You should refer to it when you are updating your household budget and when you are making financial decisions. If you do so, you should never make choices that get you into financial trouble.
Plan a monthly budget
Budgeting might not sound like the most exciting thing to do, but it’s essential if you want to keep things simple and avoid unhealthy debt.
There is plenty of help available online if you are creating or adjusting a budget. The most important thing is to make sure that you account for all of your income and expenditure, so that you know you can afford to meet all your expenses each month.
The loan and credit card payments that you have in your list of debts should be included in this budget as you need to make sure that you have enough money to cover them.
Have an emergency fund
Everyone should aim to have an emergency fund to fall back on. This fund helps you to pay unforeseen expenses or keep up with expenditure should your income cease. If you have any debt, this fund can help you keep up with payments if you are away from work sick.
Start by creating a small emergency fund of $1,000 dollars and grow your savings from there. You should eventually aim to have an emergency fund that is equal to six months of living expenses.
Pay bills when they are due
If you owe money on a loan or credit card, you should always ensure that payments are made on time. If you miss payments you can end up accruing more debt and your credit rating can be adversely affected.
The simplest way to make sure that payments are made when they are due is to keep a record of dates on your smartphone calendar, and set alerts. That way you know that you will not forget to pay on time.
Try to make more than the minimum payment
You should always make at least the minimum payment when you have debt. If you pay less than you should the debt will build up and you will end up with more stress in your life.
If you have spare money in your household budget, pay extra off your debt. Doing this helps you to keep ahead of the game and means that you are making good use of your income.
Choose which debt to pay off first
As long as you make at least the minimum payment on all of your debts, you can choose which one you want to pay off first. This helps you to identify which debt you should put any spare cash towards.
In most cases, it makes sense to pay off credit card debt as fast as possible. This is because credit cards normally have higher interest rates than other debts such as loans. You may want to start by paying off the lowest debt first. This helps you to reduce the number of debts that you have and makes life easier.
Speak to creditors if you have problems
Hopefully, if you manage your loans and credit cards successfully, you will not encounter any problems. However, sometimes life throws unexpected issues in the way, such as the loss of employment.
If you find yourself having problems that your emergency fund cannot cover you should not just ignore them. You should always contact the creditor and explain the situation. You may be able to negotiate a change in repayment arrangements. Creditors are more likely to be sympathetic if you take this action.
Loans and credit cards can be a big help in life, as long as you know how to manage them. They can help you deal with a temporary cash flow problem or the purchase of an expensive item.
However, you need to make sure that you can afford the debt that you are taking on, by creating and studying a household budget. Once you have loans or credit cards, you need to make a list of everything that you owe, so that you know when payments need to be made and who they need to be made to. Payment dates should also be listed in your smartphone calendar.
Being organised in this way makes life a lot easier and should prevent you from having problems with debt. If you do experience any problems making payments, you should let the creditor know straight away. This helps you to avoid additional stress.
Managing loans and credit cards is not as complicated as it may seem. You just need to be organised in order to make it less likely that you will experience any issues.
Build a Life you Love
The absolute driving force behind my online endeavours is to establish and maintain a life I love. A life that allows me to spend my days the way I want to spend them.
After a short stint back in the corporate world, I’m more committed than ever to spend my days doing things that bring me joy and add real value to others’ lives.
Blogging – Learn how to start your own blog or business web site. Once you get started, there’s almost no limit to what you can achieve for yourself. But, the first step is establishing your foundation and that has to be a self-hosted site. If you’re just testing the waters, I recommend Bluehost as a cost effective way to get started.
Online Store / eCommerce – Along with the store attached to my blog (Shopify), I have another business which includes an Etsy store and a Shopify store. Whether you’re selling stock you’ve purchased, dropshipping or selling your own handmade products, eCommerce is a great way to start an online business in your spare time. If you’re not particularly nerdy, Shopify is a great platform to use as it’s intuitive and has lots of help available if you get stuck.