Do You Know What You Owe?
Getting out of debt can be a difficult task to accomplish and you will spend a great deal of your time dealing with the issues related to eliminating your debt. Just getting started on the path to debt freedom can be a chore, but the best way to begin is to figure out the amount that you actually owe. Determining the exact amount of debt that you are carrying will help you choose the best course of action for paying down and paying off your debts.
Making The List
To figure out the amount of money that you owe to various creditors, you will first need to gather all of your statements related to your debt obligations and make a list of the total amount that you owe to each creditor. When you are simply paying the minimum amount or a little bit more on each statement when it comes in the mail each month, it is very easy to overlook the total amount that you owe. Many people are in denial about the actual amount that they owe and only realize how many thousands of dollars in debt they are in when they compile all of these amounts into a single list.
This method is especially effective for individuals that have more than three credit cards, multiple loans, or many monthly payment obligations because it provides an overall picture of their spending habits and a complete total of the money that needs to be repaid. It will also provide an accounting of the amount that you are paying to carry this debt, including interest charges, finance charges, and fees. The number will generally be a lot higher than you believed it would be and knowing the total amount that you owe can be great motivation to begin paying off those debts.
Making A Plan
After you have made a detailed accounting of the amount that you owe to each creditor and the total amount that you owe, it is time to come up with a repayment plan. Paying only the minimum amount to each creditor will not pay down your account and in some cases may get you deeper into debt as the amount that you are paying is dwarfed by the amount of interest that is being charged to the account. The goal is to pay down the accounts as quickly as possible without causing yourself financial hardship.
Many people are able to make a budget allowing for the payment of recurring bills while designating a large portion of their disposable income to reducing their debt levels. Others that do not make a large amount of money or that have high debt totals may need to enlist the help of a professional to create a repayment plan that they can adhere to. There are many options available for the repayment of debt and paying off your debt will make your future much more financially secure.
- Pay Debt or Build Emergency Fund? What do you do? Save money for an emergency, when rates on savings are now well below 1%, or pay off the debt, especially credit card debt which can be at or above 30% per year? Two schools of thought, one vocal one suggesting it's irresponsible to forgo an emergency......
- Debt Repayment Strategies When I had announced that I bought Green Panda Treehouse, I asked you which kind of topics you wanted me to cover. One of them, was to explore debt repayment strategies. Especially in these rough economic times, paying off your debt becomes the #1 priorities. So I sat down......
- My Networth Update - Aug 2009 If you caught the first post in my 'Dig Yourself Out of Debt' series last week, you will know how important I think it is to know exactly where you stand in terms of your total immediate unsecured liabilities, and any cash reserves you may have. Now, before the......
- The Financial Renaissance Man The following is a guest post by CT, a personal finance blogger over at his personal blog, Debtpayer.com. I have a friend who never worries about money. Ever. Whereas my wife and I are always scrambling to pay our student loans or praying for a raise at work, my friend......
- DebtEye Review With the relatively new credit card reform being put into place, we have easier to read credit card bills that show just how long it will take to pay off debt if we only make the minimum payments. Well, now we can go a step leap further with DebtEye. DebtEye......
