Debt is everywhere around us. In the U.S alone, 8 out of 10 Americans are in some form of debt and struggling to make ends meet. In fact, according to Federal Reserve’s latest report, $137,063 is the average amount of debt that a single American household owes.
Amount of debt owed by American households per category:
Credit cards: $16,883.
Auto loans: $29,539.
Student loans: $50,626.
These numbers show a 30% rise in debt from last year and implY that Americans are living way beyond their income capabilities. This is obviously not a good news.
If we think about it, almost every person living in today’s era who works a 9 to 5 job or is in some other profession needs some kind of loan to support expenses. Some turn to credit cards, some walk into banks and some get in touch with lenders.
The bottom line is that one way or another, one has to deal with debt sometime in life. Here’s where you must know how to manage debt money and not let it get the best of you.
Paying back debt money is not easy, however, with the right strategy, you can do it.
Here are 4 effective ways to manage debt money:
1.Managing Credit Cards
Credit cards bring relief to our lives but they can also become a nightmare if you don’t pay the bill by the deadline. The creditor has the right to file a lawsuit against you, take over your assets and sell them to get the money you owe. Things can get ugly real quick.
On average, an American household has a credit card debt of $8,377. Not paying your credit card debt for 60 days can spike the interest rate anywhere from 8% to 36% along with a late fee surcharge of $20 – $30.
Therefore, it is essential to handle your credit card debt smartly. Here’s what you can do:
Paying More Than Minimum: If you are paying the minimum amount on your loan or credit card, you are actually paying more interest, that too, for a longer duration.
You can correct this by applying the general rule of thumb which is paying more than minimum. The benefit of paying more than minimum is that you’d be paying less interest and your loan will be cleared much sooner.
For example, if you have $2,000 as debt balance then it will take around two years to pay off the entire loan at 14% APR. On the other hand, if you pay with minimum amounts then it can take 14 years to pay off the debt which also means that you’d be paying more interest.
- Borrow Money With 0% Interest
Getting money completely interest free. Is it possible? Yes, it is. By getting an interest free overdraft, 0% interest on credit card purchases and 0% on transfer cards as well.
Interest Free Overdraft: You can get an interest free overdraft the time of opening a new account. The amount that you can borrow will depend on how good your credit rating is. Also, note that interest free overdrafts are only for a year. After 12 months, you will be charged with interest.
0% On Credit Card Purchases: Do a bit of homework to find options and banks that are willing to offer credit cards that let you purchase with 0% interest. However, at max, it is only for 15 months. After 15 months, you’ll be charged with interest. Still, 15 months of no interest is quite some saving.
0% On Balance Transfer Credit Card: Switch to a credit card that offers 0% interest, low transfer fee, high credit limit, and a long introductory period.
- Cut Expenses Where Possible
An excellent way of reducing your cash out is by saving wherever you can. We don’t even realize but there are many ways in which we can save:
Saving Energy At Home: Insulating your house properly can help you save 20% of energy. It’s a one-time investment that can provide you with great benefits.
Other than that, using LEDs instead of other means of light bulbs can help you save at least 75% energy. Plus, they also last 25% longer. So, it’s a win-win situation with LEDs.
Smart Shopping: You can save thousands of dollars by shopping smartly. All you have to do is look for discounts and deals. Look for opportunities to save and only buy what you really need.
Reduce Dine Outs: Make your own food and you can save about $200 per month per person. Yes, this is how much an average American spends on eating out.
- Work Part Time
Opting for part-time work, if possible, is an excellent choice. There are many platforms available today that let you earn while sitting at your home. However, you must be skilled at something to start earning.
YouTube Videos: YouTube pays about $7 per 1000 views. You can make interesting YouTube videos and post on your channel to increase your followers. The more followers you have, the more you can earn. However, the videos must be original and interesting. Otherwise, nobody would be interested in watching them.
Freelancing: If you have the skills to be a freelancer then you can earn up to $39,000 a year. Join a platform like a freelancer and get started.
How to Stay Calm
It is common for people to get stressed when they are under debt. Here’s how to keep calm:
- Use Essential Oils: They can help you relax and feel composed. It’s important to not lose your mind as feeling depressed will not help.
- Draw Up a Plan: Make a plan. See how much money you have and how much more money you need so that you can plan accordingly.
If you are under debt, make sure to find ways to get things under control. The tips given in this article will help a great deal. The basic idea is to say no to loans, stay composed, and have a plan.