Debt is the burden of many people. With job layoffs, reductions in salary, increased gas prices and pretty much everything, it is a wonder that anyone lives debt free. When choosing to use a credit card or take out a loan, the question for many is “Can I go without that?” On top of all of this is the cost of credit, in particular credit cards charging interest and other service fees. In order to get a handle on how one’s money works, it is important to understand the full scope of your debt and how it affects your monthly finances.
Be Aware of Budgets
The first step in understanding your debt is knowing what money comes in (income), and where it goes (expenses). Many options exist for budget creation. An example is computer software that one plugs in the numbers and a clearer picture comes out the other end. Some are simple and some are more complex. If you choose to buy a product, such as bookkeeping software make sure it matches your financial situation. One may only need to simply create a couple of charts one of income, the other in spending.
Use a Debt Calculator
A debt calculator does the math for you (Photo credit: Images_of_Money)
Complicating the simple method is debt, how to pay it and how much to spend. To help with understanding this better. one can use a calculator to pay off debts. The internet has many links to calculators that will help one understand how long it takes to pay for the borrowed money. These calculators can add up several credit cards or loans, figuring how long it will take to pay off, and accounting for the interest. These tools will help create a deadline of paying off all or certain parts of one’s debt.
Looking into what one owes, and how long it will take to pay back, could be left unknown for many people since it may scare them. Using a budget, calculating your debt, and paying off what you can at a reasonable rate for your financial situation is the goal. Moving forward, consider paying off the higher interest rate credit cards and loans first. This will probably save you more money than if you tried to pay all your debts down equally. Strategy is key in paying down debt, and the first step in any strategy is awareness. Check out a budget, use a debt calculator and find a way to debt freedom, it is a day-to-day effort to get there, starting now.