If you are like us, we’re pleased that we had a great summer and were able to spend time relaxing or going on some new adventures. If you are also like us and many other families for that matter, it is also likely that you have spent a sizable amount of money this summer. While we are especially sad to see the summer go by, it does allow us to take a look at our finances and get back into a healthy debt situation, come Fall.
As I have already learned during this financial process, breaking tasks down into smaller steps can help to make even the more complex situations seem more manageable – and let’s face it – this is often how we feel about our finances. Dealing with getting out of debt can often seem like an impossible hurdle to overcome. So here are some steps I plan to follow to get our debt levels down and improve our finances going into the fall.
1) Making a List of all Debts
Making a list for whatever task you are trying to accomplish or remember is also an age-old and simple method of organizing your thoughts and helping you to move forward and figure out a plan. This strategy can be applied to your debts, and by penning a list of all of your debts – including credit cards, seeing them all in one place is a good visual aid to have. This list will likely include, your minimum monthly payments, interest rates and your current balance totals.
2) Creating a Plan to Get out of Debt
After you have pinpointed which debts you are dealing with, you will be better able to create a plan to help you get rid of as much debt as possible. Most people also have more than one major debt, so it is not always realistic to try and deal with them all at once. The shear volume and amount of different debts are often what make most people feel that they will never be able to improve their debt situation. However, choosing one debt to pay off at a time is often the better way to tackle this seemingly never-ending situation.
Choosing which debt to deal with first is not always a clear cut choice and can be different for everyone. Here are a few common debt-freeing solutions that I have come across and some that may be most effective for you at times, while at other times the other approached may work more in your favour.
• Pay off the bill with the lowest balance first. If you choose to pay off one or some of your smaller debts first – this can free up some extra money fairly quickly and help you pay off other debts.
• Pay off the bill that is the most behind first. If you do have more than one bill that is overdue, then you may want to juggle these types of debts from month to month until you are more caught up on your payments for each and also so that you don’t fall further behind in all of them.
• Pay off the bill with the highest interest first. You may also have more than one bill that has high interest – credit Cards are good examples of this kind of debt. An option here is to also look into consolidating your high interest credit cards debt into one lower interest loan.
• Pay off the bill or company that you will require services from soon. If this is a necessary service or product (i.e. food, housing, electricity, etc.) and you have not paid your bills and are at risk of the service being stopped, then paying back this debt first may be your best option.
3) Re-evaluating your Budget
Here you will want to include your expenses for at least the previous 30-day period or for one month, including all debts, monthly payments, interest, minimum payments, etc. and then you can identify where all of your income is currently going. Also looking at your expenses for the previous year is important as it includes areas such as taxes, insurance and other services. Next, by totaling all of these expenses you get a better picture of how you will need to manage your money in order to stay on top of things going into the next season.
The second step is to see where you can cut back on your expenses. This process is obviously crucial to your ability to pay off more of your bills and get your debt level under control. If you are able to cut back on certain services or buy products that are less expensive, then these are some solutions that can perhaps help you reduce your expenses each month/year.
Sometimes, looking for a part time job or a method of increasing your income, even if only temporarily can help you pay down your debts faster. However, this may not always be a practical option and so aiming to reduce your expenses and re-prioritize your debt payments may make more sense and be more achievable.
I suppose the moral of the story here is that you do have options. You don’t have to struggle with debt and feel defeated. If you persevere, ask for help when you need it, and create a plan to improve things – you can get your debt back into a more healthy and stable position for the Fall.
For us, we will be doing our best to reassess our current financial situation and choose a plan of action that will help us to approach our financial demands more efficiently. After all, just because the summer is over, doesn’t mean we can’t enjoy the Fall season just as much.