For many, financial independence is key to living a happy and healthy life. Living debt-free is what many aspire to, but the growing cost of living makes this more and more difficult. The result is expanding debt that becomes burdensome on you and your family.
Unfortunately, the average U.S. household is more than $90,000 in debt. This debt load costs a household more than $6,000 each year. So how do you handle debt and manage it effectively?
Here are four helpful debt management strategies:
Tip #1: Pay Down Principal
Nothing will improve your debt situation faster than an aggressive push to reduce what you currently owe. The more principal you can pay off, the less money will be wasted on interest in the long-term. But be careful of not biting off more than you can chew by paying amounts to your creditors beyond what is financially reasonable for you and your family.
Tip #2: Avoid Unnecessary Spending
Not all debt is created equal. Student loans, for example, have value because they are an investment in your future. But charging a vacation on a high-interest credit card, for example, has no such value. Understanding this key distinction is a prerequisite for good debt management.
Tip #3: Use Automated Bill Pay
Even the most diligent among us can still forget to pay an occasional bill, leading to late fees and other expenses. Switching to direct debit or another form of automated payment is an easy way to ensure this doesn’t happen.
Tip #4: Follow a Budget
To be effective, households like small organizations need to have a budget. If you take the time to track every dollar your household spends in a given month, you will probably be surprised at how much money you waste. By budgeting, you will be able to highlight unnecessary spending and reduce your overall debt.
Smart debt management is critically important for financial independence. These helpful strategies will help you manage debt as effectively as possible. Contact me for more information on how you can Save Wisely and Spend Happily.