Realize you're in debt...check. Contact credit companies...check. Start paying off bills...ummm where do I start? If you feel this way, you're not alone. A lot of young men and women who take the first step to get rid of debt get a little overwhelmed when they take a look at what they really owe. They don't know where to begin. Don't worry! There are several ways that you can go about it and I'm going to tell you about 3 successful options.
1. Pay off 1 bill at a time.
As far as I can tell, this is the most popular method. It consists of choosing a bill and putting all of your extra money towards it until it's gone (while at the same time not neglecting other bills). I recommend starting with the 1 with the highest APR or the smallest balance. If you want to avoid paying more money right now, you should choose the card or bill with the highest APR. This is because the sooner you get the balance down, the less you'll be paying. (Always check your APR rates, they're probably higher than you think). But, if you're looking for instant gratification, I would pay off smaller bills first. This way you get the satisfaction of physically getting rid of a bill, which can provide motivation to continue. Either way, you're well on your way.
2. Pay of a little of each with each paycheck.
This is a method that can work if you stick to it, but it can also make you feel like you're running around in circles if you don't pay enough. When you split your income among the bills you have, they're all getting lower, but not very quickly. This is a good plan if you're trying to get on track with paying your bills on time. Just take a calendar, mark you're paycheck days and split it evenly (don't forget about rent and food!). Over the course of the next few months all of your bills will decrease and you can get into a bill paying rhythm. But if you're looking to get satisfaction quickly, I would choose method 1 or 3.
3. Choose 1 bill per month.
This is good if you're not looking to pay off one bill at a time, but you don't want to keep splitting your extra money to cover several bills. I came up with this easy method myself and my debt has seriously decreased. After paying your monthly bills in total, take any amount of money you have left over (we'll talk more about budgeting another time) and put it toward 1 bill. You choose which one, it could be the one with the highest balance or lowest balance. As mentioned with #1, it can be more satisfying to pay little bills off first (the ones that won't come back like store cards, medical bills, or loans), but because you're taking a substantial amount of money to it (you already paid the minimum balance, remember?) it will make a serious dent in the balance, leaving you with a feeling of accomplishment. This is a great way to get several bills down in a matter of months. If you have 4 credit card bills and pay the "bulk" money to 1 each month, in 4 months you have 4 bills that are much lower, if not gone! This method doesn't have to be by months either, you can do it every 2 weeks or 2 months or whatever you feel comfortable with.
Regardless of which method you choose, always remember to pay more than your minimum balance for each bill (not including utilities, unless you're backed up on your payments). If you simply pay the minimum balance, you're doing nothing more than paying your finance charges, if that. Even 5 dollars more (you can spare that don't worry) will get you ahead in the long run.
Next time..."AHHH...I can't afford this!"
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