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You shouldn’t stress yourself over your debts every day.
You shouldn’t stress yourself over your debts every day.
Anyone who has had debt problems understands how difficult it can make your life. It practically carves out its own space in your head – and securing a moment of peace is a Herculean task. You keep thinking about how much you owe and wonder how you’re going to pay it back.
If this is something you take care of, you are not alone. In our research on psychological cost of debt, we found that 28% of people in debt think about it at least once a day and 20% think about it almost every day.
Even though a lot of people are obsessed with their debt, it is not a way to live. But, to stop this habit, you must first understand exactly what causes it.
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Why are we obsessed with debt?
When consumers think about their debt on a daily or weekly basis, it is usually because they feel the debt is out of their control. This often happens with high interest credit card debt because the balances seem to keep increasing. Another example is when you have so much debt that you can barely pay your bills every month or have to dip into Your savings to stay afloat.
You end up not knowing how long it will take to get rid of your debt or if that’s even a possibility. At this point, anxiety about your financial situation may find ways to creep into your mind every day.
Can you afford to take a day off work if you are sick? What will you do if your car breaks down? The only way to solve this problem is to make a plan to get rid of your debt.
How to take control of your debt
You finally need one thing to eradicate your worries about debt: a payment plan that you can afford with a deadline to pay off everything you owe. Once you understand this, you will no longer have any doubts about your financial situation.
It’s easier said than done, but here’s how to achieve it:
1. Make a list of all your debts
For each debt, include
- the total amount you owe,
- the interest rate and
- the amount of the monthly payment.
2. Calculate your disposable income
To get your disposable income, start with your net monthly salary (your after-tax income, pension contributions, and any other automatic deductions from your paycheck).
From that take-home pay, subtract the minimum monthly payment amount for all of your debts and essential living expenses.
What is left is your disposable income, and this is what you will use to pay off your debts.
If you don’t have a lot or no disposable income, first make sure you’ve eliminated all of your non-essential expenses. Now is the time to buckle up and cut off anything you don’t need. If you’re still in the negative, I’ve listed a few ways to lower your monthly debt payments in the section below.
3. Decide which debts you will prioritize
You’ll use your disposable income to pay extra for your debt, but first you’ll need to know what debt you need to pay off. I recommend it avalanche method, in which you pay off the debts with the highest interest rates first. This saves you the most money.
Be careful if you have debts on introductory offers. For example, if one of your debts is a 0% deferred interest offer, the creditor may charge you interest back to the date of purchase if you don’t pay it back by the end of the introductory period. . In this case, you would want to prioritize that debt even though it has 0% interest at the moment.
Ways to lower your monthly payments or lower interest rate
There are several options to lower your monthly payments, lower interest rates, or both.
The most popular is debt consolidation, which you can do with a Personal loan or one credit card balance transfer which has an introductory APR of 0%. You will likely need a good credit score for either option. If you qualify, debt consolidation can get you a better interest rate and potentially a cheaper monthly payment. Another benefit of consolidating debt with a personal loan is that it gives you a fixed deadline to pay off your debt.
You can also try to negotiate with your creditors. If you contact them to explain that you can’t make your payments, they might be willing to lower your monthly payment or lower your interest rate. It is often better for them to keep you paying because if they sell your debt to a collection agency, they will only get pennies for every dollar.
Get rid of debts from your head
It’s no worse than thinking about your debt every day or even several times a day. However, nobody’s debt is desperate, and if you come up with a realistic plan to pay it off, it will do wonders in relieving your stress.
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