When it comes to confronting your financial fears, the ultimate four letter word is debt. For many households, debt it is the single biggest contributor to stress. It has the power to destroy relationships and even lives. Everybody’s tolerance of debt is different. Problems occur when two people in a relationship have different views about debt, or when debt repayments cause financial hardship. If debt is dragging you down or causing fear, here is how to confront it.
- Make a list of all your current debts, the interest rate you are paying on each debt and the minimum repayments. Your first priority is to make the minimum repayment on all debts. The next priority is to make additional payments over and above the minimum on the debt with the highest interest rate. Once that is paid off, start on the debt with the next highest interest rate and so on.
- It goes without saying that if you are struggling with debt, you shouldn’t take on more debt. If things are getting out of hand it is tempting to borrow more to keep up repayments. Instead of this, negotiate a new repayment arrangement with your creditors or refinance over a longer term.
- Free up more money to pay off debt. Make a list of everything you spend in a month and look at what you can cut back on. Personal items, groceries and subscriptions to services you no longer use are the easiest areas to target.
Be smart with your borrowing. Borrow only what you have to, for the shortest amount of time at the lowest possible interest rate. Shop around for the best deal rather than the one closest to hand. Don’t borrow up to your limit; leave some wriggle room in case something unexpected happens.