Debt is a common financial burden that many people face. While some debts can be manageable, others can quickly spiral out-of-control and negatively impact your credit score. Understanding your debt is the first step towards managing it effectively.
It’s important for you to know how much you and what you are able to afford paying on your debt. You may have a pile of either opened or unopened bills stacked and overflowing somewhere in your home. Looking at this mountain of bills will make them seem like Mount Everest. It’s time to attack that mountain.
Bring all of your bills together in one spot. Now, sort them by the creditor. Take the most current bill from each and put them aside. Unless you have more than one debt with a creditor, you can shred all the bills in the other piles. Wow, you just turned Mountain Everest into an anthill! Congratulations, you are ready for your next step!
Open the bills and start identifying all your debts, including credit card debts, personal loans, student loans, and mortgages, etc. List the lenders, balances, and interest rates for each. Then, prioritize your debts and choose a method to focus upon to pay it off. The two methods are the the avalanche method and snowball method.
We’ll discuss each method separately, so you can decide which one might seem right for you.
