1. Start by calculating how much you owe.
The first step—assessing the damage and getting a full picture of how much debt you’ve accumulated—can be the hardest, especially if you’re struggling with debt. It can be tempting to bury your head in the sand, but now that you have the numbers in front of you, it’s time to face reality. Take a look at your bank and credit card statements and go through the charges line by line. This is a good way to make sure you identify every purchase in the event of credit card fraud.
Calculate how much you spent, how much debt you now have on each card, when each payment is due, and what the interest rate is for each.
2. Modify or create a new budget, taking into account debt repayment.
Taking a financial health assessment in the summer gives you the opportunity to end the year strong and start the new year with a plan in place. Don’t be afraid to face your debt head-on and take responsibility by: Create a budget This will help you reduce your debt and avoid holiday debt later in the year.
Write down a list of your fixed expenses, including mortgage or rent payments, bills, transportation costs and groceries, then determine how much is left to pay off your debts and discretionary spending.
For example, if you have $500 left over after paying for housing and meals to feed your family, put the rest of your income toward paying off your debt. If possible, automate your bill payments so that they coincide with your paydays and don’t incur late or missed payments, or non-sufficient funds (NSF) fees—which can cost you up to $45 or $50 per transaction.
If you’re new to budgeting or feel like you need some extra help, we have a webinar for just that! Don’t miss out on Making Cents of Money — Budgeting Basics
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