Get Smart about Debt
Published October 1, 2020
By GreenPath Financial Wellness
If you are dealing with debt, you aren’t alone. The average American household has an average balance of about $6,600 in credit card debt, and that’s not taking into account home, auto, and student loans. Paying off your debt isn’t always easy but having a plan can go a long way in achieving your financial goals.
Check out these seven tips from our partners at GreenPath Financial Wellness that can help you to get out of debt more quickly, so you can save more, plan for the future, and live life financially well.
To know where you’re going, you have to know where you’re coming from. Are you spending more than you make? Do you have excess money each month that you could be putting toward your debts? Use GreenPath’s budgeting worksheet to get an idea of how much money you have coming in vs. going out each month and look at your spending habits.
Once you have a full financial picture of your monthly surplus (or deficit), figure out what your spending habits are and how you might change them to get out of debt. Maybe you’re spending too much on subscription services – or realize you’re spending more than you allotted for groceries each month.
This online class on Redesigning Your Financial Habits is a great place to start. In about half an hour, you will learn some of the science behind habits, identify your spending habits, and make a plan to retool them to work for you.
Once you have an idea of where you are spending and why, see if there are areas where you can cut back. If you need some extra help deciding where to make cuts, this workbook is a great tool to help you to prioritize your expenses.
Great, you’ve made a plan! But are you sticking with it? Plan your paychecks and check back to see how your actual spending compares with your plan. Use the Highlighter Test to see if your spending habits are in line with your goal, or if you might need to change things up a bit. Make adjustments as you need to.
Set up direct deposits and automated payments so that you don’t miss due dates and get hit with a late fee. Use alerts and overdraft protection to help you avoid mistakes.
When choosing a strategy, you will probably want to pay the minimum on all your debts and focus extra payments on one debt at a time. When you pay one account off, redirect the monthly payment to the next one in line, adding it to the minimum you were paying already. This way, each time you pay off one debt, your payment on the next one gets bigger.
Depending on your situation, there may be options for you to get out of debt more quickly. If you have high-interest credit card or other unsecured debts, a debt management plan (DMP) could be just what you need to get out of debt for good. A DMP works with your creditors to bring your accounts current, lower interest rates, and eliminate fees. This means that more of your payment goes toward reducing your account balances. It can help you pay off debts faster and save money on interest. An added benefit is that once the debt management plan is established, diminishing collection calls and creditor balances help reduce worry and stress about your debt situation.
If you are considering a debt management plan, look for a reputable, nonprofit credit counseling agency to assist you. Our partners at GreenPath offer free debt and credit counseling, and if appropriate to your situation, they can support you through a DMP. (Check out their DMP calculator to get an idea of how much you could be saving.)
Taking control of day-to-day financial choices is the foundation for creating more opportunities. If you’re still unsure of where to start in paying off your debt, we encourage you to connect with our partners at GreenPath for a free financial counseling session. Their professional, caring counselors will explain your options and support you to develop a personal action plan that works for you.
We are proud partners of the nonprofit, GreenPath Financial Wellness. Their mission is to help you reach your financial dreams. No matter how much debt you are facing, they are there to help. GreenPath also offers a multitude of resources and counseling to help you achieve all aspects of your financial health. For more information, visit greenpath.com. Tackling your debt doesn’t have to be scary. With Greenpath’s seven tips and multiple resources that are free for anyone to use, bringing down your debt total has never been easier.