photo credit: Unsplash / Vinh Pham
Follow These 5 Steps to Financial Freedom
Let’s be real. Being in debt is its own special kind of hell. Whether you’ve racked up debt from student loans, credit cards or medical bills, the struggle is real. But don’t worry; it doesn’t have to be forever. Here are 5 steps for escaping debt hell:
Step 1: Reality Check
The first step is to take a look at your current debt situation. Be sure you have the following information documented:
- The total amount you owe
- The interest rates
- A list of your current creditors
- Current contact information for your creditors
Step 2: Get Help
Paying off debt can be a tricky business. If you’re not feeling confident, or you just want to make sure you’re on the right track, call a nonprofit counseling service. The Financial Counseling Association of America (FCAA) can help you build a budget and negotiate with creditors.
Step 3: Call Your Creditors
You can call your creditors to negotiate more favorable repayment terms. You won’t always have success with this approach, but it’s worth the phone call to find out. Below are some options of what you can ask your creditors for:
- Lower payments
- Waive late fees
- Divide payments into smaller amounts
- Defer payments
Step 4: Select Your Strategy
Now that you’ve talked to your creditors, it’s time to select your payoff strategy. The first strategy to consider is the “Avalanche Approach”. You pick your debt with the highest interest rate, and pay that off first. This strategy can save you a significant amount of money in the long run. Another strategy is the “Snowball Approach”. You choose the smallest debt and put all the funds you can into it. Once you’ve conquered it, pay off the next smallest debt.
Step 5: Keep Track
Closely monitor your budget, debts, and the details of your financial game plan. It may seem tedious at first, but the more information you track the easier it will be to make any necessary tweaks to your payoff strategy.
Remember, getting out of debt isn’t an easy road, so don’t be too hard on yourself. Follow your debt payoff strategy, and don’t forget to reward yourself when you reach a goal. As always, we’ve got your back.
Still have questions? Here are answers to common debt pay-off questions.
[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by On Your Own, the National Endowment for Financial Education or any of its affiliate programs.]