Starting the new year off with a high amount of debts is never a good feeling. You might feel like the new year will just bring about more financial problems and thinking about all of the money you owe can get pretty discouraging, especially after the amount of spending you had to do during the holidays. But don’t give up. Take advantage of the hope that the new year brings, reign in the negativity, and make a pact with yourself to take control of your debts in 2022! And if you don’t know where to start, keep reading to find out how you can control your debt rather than let your debts control you.
Face your debt head-on
When people get discouraged by the amount of debts they have, there’s this tendency to shy away from them. So instead of looking at their debt every day and trying to find ways to make the situation better, they will instead completely stop looking at it in order to avoid the stress of having to deal with it. And of course you shouldn’t be faulted for not wanting to deal with the anxiety being in debt brings — it is, after all, extremely difficult — but you should still own up to your spending habits and try to better your situation. The longer you avoid the problem, the worse it will get. So the very first thing you should do in order to take control of your debts in 2022 is to face them head-on. Don’t let the fear of your debts hold you back from being the best version of yourself you can be!
Create a budget
The most important thing to do when it comes to ridding yourself of debt is to create a budget. A budget is the only thing that will help you keep track of all of the money coming into your account as well as the money leaving your account. It will help you analyze your expenses in terms of letting you know what you owe each month, and how much money you will have left over after paying your monthly expenses. It will also help you figure out how long it will take you to pay off your debts completely. It is the most essential tool for taking control of your finances. In order to create the best possible budget, make use of this online tool that can completely change the way you approach taking care of your financial health.
Choose a debt repayment strategy
After creating your perfect budget, you need to come up with a plan. That plan usually involves how you will choose to pay off your debts. You’d be surprised by how many debt repayment strategies there are. The two most common ones are “debt avalanche” and “debt snowball”.
Just as the imagery suggests, repayment with the debt avalanche method suggests making the debt that has the highest interest rate your priority. This is the most logically sound solution, because it means that you’ll be paying much less interest in the long run. A debt snowball, on the other hand, suggests making the lowest debt your priority. This has some psychological benefits because if you’re tackling the smallest debt, that means you’ll pay that debt back faster, and you’ll feel like you’re making progress so you won’t be tempted to fall back into old spending habits.
There is also the possibility of transferring your debt to a low-interest credit card. This is known as a balance transfer and can be an interesting option, especially since most come with good promotional terms such as zero interest for the first month!
Make payments on time and revise your budget
After choosing the best repayment method for you, all you need to worry about is making your payments on time so as not to negatively impact your credit score. In order to make sure you’re on the right track, you should check your credit score regularly for any slip-ups. Moreover, you’ll want to constantly be revising your budget, since a lot of things can change within a month and you might have to deal with unexpected expenses. You could also be paying off a big chunk of your debt, meaning that your minimum payments could be lower, and you therefore might be able to put more money towards your debt than you originally planned! You’ll notice these things as you keep track of your expenses and revise your budget.
Seek help
If you feel like no matter what you do, you still can’t take control of your debts, then it might be wise to seek help. Luckily, there are many tools you can make use of in order to better your financial situation. The great thing about these tools is that you won’t have to meet anyone in person. So if you’re anxious or embarrassed about the state your finances are in, Allevia can help you achieve your goals without the added stress of meeting someone to discuss them in person. By filling out some automated questions, the platform will analyze your entire financial situation, provide you with advice and solutions, and will help you keep track of your progress so that you can resolve your debts in 2022, and start the next year debt-free!
