Fixer Upper: How to really manage and pay off debt
Posted By: Matt in Loans on 02/11/2017 at 09:14:04
As much as anyone from financial advisors to friends will tell you their method of managing and paying off debt, there really is no right answer.
Think of it like a math problem from school, and how some teachers would dock you points for getting the right answer but the way you got there (the infamous showing your work) wasn't how you were taught to do it by said teacher.
At the end of the day, as an adult who is trying to manage debt and budget properly, the most important element of credit cards and unsecured debt is paying it down and eventually off. How you get there really doesn't have the proverbial right answer.
But there are, in fact, some strategies that are universally lauded as being fairly spot on for how to manage debt. Of course, budgeting will always reign supreme as far as debt is concerned because the two go hand in hand.
Those who aren't afraid to tackle debt, and that simply means writing it out to see the big picture, know that their budgeting and going without and managing expenses versus your income, so that you can focus on paying more than the minimum payments, is key.
The best method of debt control and paying it off starts with the reverse pyramid effect. You start with the balance that is the one with the highest interest rate, and then you begin paying on that first, over and above the minimum. As far as the other debt is concerned, you pay the minimum on that until that first balance is paid off, then move on to the next highest interest rate in terms of credit.
Another way of looking at debt is focusing on smaller balances with high to medium interest rates and paying them off first with the most money leftover after you budget. This allows you to see progress being made, which goes a long way to help that feeling you have that you'll never see the light at the end of the tunnel. For some, they can't continue to pay and not see any results, so this method of debt repayment shows that there is hope.
No matter which path you take, know this: the budget has to run parallel with your debt repayment goals. You can't have a budget that is even, meaning your expenses are covered just barely by your income. That simply means you're allowing yourself to make nothing more than minimum payments on your credit, even though you're missing out on how to maximize your repayment plan altogether.
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