Having large amounts of debt and not enough income to really make a dent in them can cause extreme financial stress. Being in a constant state of worry and stress over money isn’t good for anyone. Reducing stress is easier said than done, but working on lowering your debts is a great start. Once you start seeing more and more of your debts being paid off, you’ll begin to feel much better. But how do you get started?
Lowering and paying off your debts can feel like an overwhelming task, especially if you feel like you’re drowning in bills. Luckily, there are some things you can do to begin tackling the stress and the debt simultaneously. Start by taking a really good look at all of your expenses, making a budget, and planning for emergencies, and you’ll feel better about your financial situation before you know it.
1. Use the Debt Avalanche Method
One of the top ways to tackle financial stress is to eliminate as much debt as possible. With the debt avalanche method, you can start paying off your highest-interest debt first. This allows you to get rid of the debt that’s costing you the most money while still making the minimum monthly payments on all your other debts as you go.
Here’s how it works: First, you make the minimum payment on all of your debts. If you have extra funds available after that, you use them to pay more on the debt that has the highest interest rate. This accelerated repayment plan helps your credit score since you’re making regular payments on all your debts. It also allows you to pay off expensive debts more quickly.
2. Create a Budget
Creating a budget can really make a difference in your finances as long as you commit to sticking to it. To create your budget, make sure you gather all the information you’ll need including loans, credit card statements, pay stubs, and monthly bills. Some people like to make their budgets on pen and paper, while others use a spreadsheet on the computer or a budgeting app. Use whatever method is easiest for you.
Budgeting can take some time, but it can greatly benefit you in the long run. Once you know how much you spend every month compared to how much you make, you can start planning how to best manage your money. Having a budget that outlines all of your expenses can help you see where you can cut costs, which is the first step towards being able to pay off debts and build a savings account.
3. Build an Emergency Fund
Emergency expenses can be one of the toughest things to face financially. Car repairs, sickness, and unemployment never happen at a convenient time. If you and your family don’t have an emergency fund, it’s important to start saving to build one as soon as possible.
Making a fund before an emergency occurs will ensure you have the money you need when it does. That way, when something unexpected pops up, you don’t have to worry about looking for money on top of handling the situation at hand. This can make an already stressful situation not nearly as bad.
4. Consolidate Debt
If you have a large amount of debt, you might want to consider how you can consolidate it. This will allow you to save more money in interest and help you pay off your debts faster. You can consolidate debt by applying for a personal loan or transferring the debt to a low-interest credit card.
Debt consolidation can be done in a couple of ways. You can enroll in a debt consolidation program, or you can apply for a debt consolidation loan from Credello or credit union. Once you have this loan, you use it to pay off your debts, leaving you with positive payment history, multiple debts being paid in full, and fewer open lines of credit on your credit report. Then, you make regular payments on the single consolidation loan until it’s paid off.
5. Refinance Student Loans
Refinancing student loans is one of the top ways you can take away some financial stress. Refinancing means you’ll be replacing your current loan with a new one that has a lower interest rate, which can lead to you saving a significant amount of money in the long run. Depending on your income and credit score, you may be able to secure much more favorable terms.
Talk to your student loan lender and ask them what your options are. There are many repayment options, some of which are less known. For instance, you may be able to extend your repayment terms, which will allow you to pay less each month.
6. Create a Side Hustle
Even though working overtime or taking on an extra job isn’t doable forever, you might be able to take on extra work for a few months while you work to pay off your debt. This can also be a fun and easy way to allocate more time to your hobby. For example, if you like to paint or make crafts, you can try selling a few pieces of your art for extra money.
If you’re not crafty, there are plenty of other ways to make extra money out there. A part-time job is one way many people gain extra income. You could also pick up a freelancing gig online, work for a ridesharing company, or deliver groceries and takeout orders. For those that are handy, you can even offer your services helping people with repairs or odd jobs.
Stop Stressing Today
The above tips will naturally help eliminate your financial stress because you will have more money in the bank after your bills are paid. It can feel like a daunting task to pay down your debts and get your finances in order, but you can do this!
Make a money date with yourself to address the above tips, create a budget, and get a solid plan in place. Once you have dedicated some time to deal with it and begin to see progress, you will start to see your stress dissipate.