We are already into July. Midyear is a great time to check on your debt and either decide to tackle that debt, or see if you are on-track with your current debt reduction plan. Investing in your debt is a crucial step towards financial freedom so let’s take a look at ways to handle that debt.
The first step is to evaluate your current debt situation - identify the types of debt you have, the interest rates, and the outstanding balances. This will give you a clear picture of what you're up against. Keep in mind that all debt is not equal. For example, high interest credit card debt should be addressed before other types of structured debt such as a mortgage.
Next, create a plan to eliminate your debt. Set a specific, measurable goal for when you want to be debt-free. Some refer to this as the SMART approach: Specific, Measurable, Achievable, Realistic/Relevant, and Time-bound. This system makes your plan specific and trackable. Whatever you decide, do not waste your time and money “topping up” or paying a little extra on each debt every month. This is a waste of time.
Determine whether the debt avalanche or debt snowball method is best for your situation. The avalanche method focuses on paying off high-interest debt first (saving you money), while the snowball method starts with the smallest balances (quick wins). Either method will work, but you need to determine if you want to save the most in interest, or want quick wins and a faster sense of victory.
Whichever approach you choose, stick to your plan and make debt repayment a priority in your budget. Celebrate small victories along the way, and don't be afraid to adjust your strategy if needed. Investing in your debt today will pay dividends in the future, freeing up resources to save, invest, and achieve your financial goals.
As an independent Certified Financial Planner™, I can help you change your relationship with money and make better decisions. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #stressfree #saving #budget #CFPPro #snowball #avalanche