My least favorite part of adulting is trying to figure out my debts – anyone else feel that? If so, this post is for you!
We have previously talked about adulting basics and handling your medical bills, it’s now time to delve a little more into what a grown-up should know and focus on money. Specifically, talk about the money you’ve already spent and were not yours in the first place. Yes, it’s the four letters, D word: DEBT.
Again, not the most fun thing to do, but sometimes as necessary as oxygen, since ignoring your money problems for too long only translates to a snowballing effect. Using effective debt solutions like an individual voluntary arrangement – IVA may be the right one for you! This is a formal and legally binding agreement between you and your creditors to pay back all, or part of your debts over a period of time at an affordable rate.
Advanced Adulting: Handling Your Debts the Right Way
Evaluate Your debt
Making smart money choices is all about looking at the numbers and being realistic, if not even a bit pessimistic about your options. Considering the worst-case scenario gives you a little extra cash to enjoy if things aren’t so gloomy and keeps you alert. You can also click here to get assistance on how to write off your council tax debt.
Add your pending student loans, credit card debt and other amounts you own such as a mortgage. Divide these values into categories and the creditor. Ignore obligations under $5,000, since you can handle these by merely budgeting better. Focus on the massive debts, over $20,000. Get professional mortgage advice from Firstxtra financial advisors.
How much can you save?
If you can say that amount from the top of your mind and motivate it, kudos to you, just go to the next step. For the rest of in-debt mortals, it’s time you learn how to monitor your spending and stick to this.
There are a few budget apps you can choose from to help you stay on track. Some of these even automate your payments, send you notifications when unusual activity is detected on your account. If you want to focus on saving, select an app that always shows you how much money you have left, as a friendly reminder to stop wasting it.
Although it seems like a personal affair, our spending habits are, in fact, heavily influenced by our environment, friends, and family. Peer pressure and keeping up with the Joneses are some of the main factors that encourage irresponsible spending.
When you undertake a life-changing journey such as paying off your debt, you need all the help that you can get. Let your friends and family know about the struggle and make conscious decisions regarding your spending on gifts, holidays, clothes or eating out. Reassure them that the new you is just handling adulthood better, not avoiding them.
Settlement or consolidation?
Getting rid of a considerable amount of debt can be tackled in different ways, either consolidation or debt settlement or better use this debt payoff strategy. For student loan debt, there are a number of companies that can help refinance a high-interest student loan, which can greatly reduce the financial burden it may pose.
Consolidating all the debt you have defined at the beginning means taking out a new loan to cover it all and only end up with a single installment per month. This is an excellent choice if you have been diligent about your payments so far and still have a good FICO score, but also still have a massive amount of debt.
On the other hand, debt settlement means playing the game a little rougher. If you have already missed a few payments and feel that you are going downwards, but are determined to turn things around, you could think about one of the many available debt settlement options.
Your agent will instruct you to stop paying your creditors and instead, open a savings account where you deposit the amount you computed in step two. It is advisable for this amount to be slightly more significant than your usual payments so that you cover the debt faster. The real danger if you choose this course of action is to damage your credit score consistently since the creditors will alert the debt bureaus about missed payments.
On the positive side, if you stick to the plan, in about 3-5 years you will have saved enough money to have a solid negotiation base. The debt settlement company will contact your creditors and offer a lump payment in return for a much lower settlement. If successful, they will end your debt and get their commission from the amounts you have already saved.
Craft a plan
Get out your pen and paper and do the math of your life. Contact the credit bureaus and get a copy of your scores to evaluate what option best suits your interests. Start shopping around for options and don’t settle for less than great for your wallet.
Are you ready to change your life? Have you already accomplished such a milestone?