Having control over your debt is essential when establishing and maintaining a solid financial plan. By planning ahead and using good money management, it is possible to obtain complete control over your debt.
Face your debt
Often times, individuals do not realize or know how much debt they truly have, and many avoid facing the truth. To get control over your debt, the first step is facing reality and answering the question, “How much debt do I have?”
Get started by gathering all your bills and making a list of all the debt you really have. To name a few, this includes debt from credit cards, student loans, furniture payments, mortgage payments and car payments. Beside each item, note the lender, amount of money you owe, minimum monthly payment and the interest rate. To get started, download our Debt Control Spreadsheet.
Organize Your Debt
Many experts have differentiating opinions on organizing debt and the order of which debts should be paid off. Below are three different options for how to organize your debt. Regardless of the option you choose, consider meeting with an Ameris Bank personal banker to develop a debt control plan and begin to make a timeline for when you would like to pay off each debt. Visit our Meet a Debt Payoff Goal Calculator to help you determine the payment amount you will have to make each month to meet your goal.
- Option 1 – Organize Based on Debt Amount. This option organizes debt from the smallest to the largest amount owed. Start by paying off debt with the smallest amout owed and continue working up to finally paying off the largest amount of debt owed. If you are a person that likes seeing quick results, this may be the best option for you. As you are paying off debt, remember to continue paying the minimum payments of all other debts, while paying more per month (over the minimum payment) for the debt you are currently focused on.
- Option 2 – Organize Based on Interest Rates. This option organizes your debt from the highest to the lowest interest rate. Begin paying down your debt starting with the highest interest rate debt first. Continue doing this until all debts are paid off. Remember to continue paying the minimum payments of all other debts, while paying more per month (over the minimum payment) for the debt you are currently focused on.
- Option 3 – Organize Based on Secured or Unsecured. This option categorizes debt into Secured debts and Unsecured debts. Secured debts include tax debts, student loans, and child support payments. Unsecured debts are related to services that you use, such as medical bills. First pay off secured debt, followed by paying off unsecured debt. Remember, continue to pay the minimum payments of all other debts, while paying more per month (over the minimum payment) for the debt you are currently focused on.
Implement Money Management
Start implementing money management into your daily routine. Over time you will come to appreciate your good money management habits.
For more tips on Controlling your Debt, visit CNN’s Money 101.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.