Hello again, class! I must say, I’m surprised to see so many of you here given today’s subject matter. Typically, this is the lesson that causes the most anxiety, the most dread, and sometimes, the most tears. We’ll be talking today of course about debt. To a lot of people, debt is a truly scary notion and can represent one of the largest sources of stress in everyday life. Thankfully, there are steps that can be taken to help better manage debt as well as practices to stay out of it (and even leverage some of it to your advantage). So, resist the urge to run away with your hands over your ears and let’s get settled in for an enlightening and candid conversation about managing debt.
Get to know your debt
The first step in figuring out how best to tackle debt is to get a better idea of how much you owe and to whom you owe it. Debt can crop up in a number of different ways from obvious ones like student loans and credit cards to lesser-known varieties such as property liens and bills sent to collections. Knowing exactly how much you owe helps you tackle the issue more effectively with fewer surprises along the way. After getting an idea of the actual number you owe, determine who you carry debt with and what the payment schedules are. A quick way to get even further underwater is to miss payment due dates, so set some calendar reminders to make sure you don’t miss any of them.
Know your credit score
Credit scores can impact a lot of things in your life. If you’re trying to get a car loan, rent an apartment, add a cell phone plan, or finance anything, your credit score determines how expensive (or inexpensive) those endeavors can be. Knowing your credit score makes you an informed consumer and also arms you with the knowledge of what you need to do in order to raise it. Additionally, a credit report (which is free through a number of sites and services, these days) will provide you a list of all creditors you owe money to. Any bills or open bank accounts you may have forgotten about through the years will pop up giving you the chance to have a more complete picture of your credit situation.
Improve your credit score
Now that you know what your credit score is and have a complete view of your bills and debt, it’s time to start working on getting your score up. No matter where you fall on the financial spectrum, increasing your credit score is always a good thing. The easiest way to start increasing your score is to ensure you pay at least the minimum balance on all your bills on time (this is where organizing your due dates is huge). From there, reducing the overall amount you owe across creditors makes a massive impact. This is where debt consolidation can make a lot of sense. There are quite a few services out there that specialize in consolidating debt which can help keep you organized and even potentially reduce the overall interest rate you pay.
Better understand credit
Getting a good grasp on how credit works can be a great way to use it to your advantage. Carrying a credit card is a good way to help raise your credit score if you manage it properly. Start by placing everyday bills on a card that you know you’re able to pay off monthly. Not only will this get that credit score to start trending up, but you’ll also be able to utilize some of the many perks different cards offer (may we suggest signing up to learn more about a certain health and wellness credit card coming out soon??). The more you’re able to demonstrate to lenders that you can effectively manage and pay off debt, the higher your credit score will become which in turn leads to more attractive borrowing possibilities. Knowing how the game is played is half the battle!
That wasn’t too bad, was it? Look, we know debt can be a scary and overwhelming topic. Like almost everything related to financial health, creating a game plan is key. It can be easy to stick your head in the sand when it comes to dealing with debt but confronting it head-on will arm you with the type of knowledge you need to start becoming more intentional about your strategy. Armed with the proper information and some realistic goals, your financial health can dramatically improve how you deal with debt. Be sure to join us next week as we take a look at the different ways you can start to plan more effectively for your financial future.