| Ways to Pay Off Debt |
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| Written by Chris Blanchet |
| Wednesday, 20 January 2010 20:18 |
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As far as personal finance management is concerned, paying our bills on time is a requirement. However, at some point in time, most people have trouble making those bill payments on time. A crucial point to make is that we can all avoid such difficulties by planning for our monthly expenses and managing finances in such a way that we are paying our bills regularly. We achieve this by measuring all of our household obligations while alternately saving for that rainy day. The savings factor is essential in that it allows us to adapt to temporary, unscheduled reductions in income.
As far as personal finance management is concerned, paying our bills on time is a requirement. However, at some point in time, most people have trouble making those bill payments on time. A crucial point to make is that we can all avoid such difficulties by planning for our monthly expenses and managing finances in such a way that we are paying our bills regularly. We achieve this by measuring all of our household obligations while alternately saving for that rainy day. The savings factor is essential in that it allows us to adapt to temporary, unscheduled reductions in income. When we consider any financial plan, the first thing we do is gather all relevant information. When tackling debt, relevant information means all of our bills. With our statements spread out before us, we can add up all of the minimum payments to determine our total obligation. Taken one step farther, we can prioritize each bill based on the interest-rate charged by the creditor. Next, we must calculate the minimum amount due of our bills; this will give us the total sum that we need to pay on a monthly basis. While completing our calculation, we need to divide the total amount due by the number of pay periods we have in a given month. If we have two pay periods, then we need to split our total monthly debt between our pay periods. Yes, the joys of personal finance! No wonder budgets dont work! As we can see, balancing our personal finances in an efficient manner is no simple task. It clearly helps if we have adequate knowledge of how to manage personal finances, but most schools never teach this skill. So while paying our bills every month is good and wise, finding the best way to deal with our personal finances, although equally good and wise, is much more challenging. In some cases, we might end up in a situation where we cannot manage paying our bills given a reduction or loss of income. In these unfortunate situations, we have two options. The first involves revisiting our bills and coming up with ways to reduce or eliminate duplicated or worthless payments, such as unused memberships, expensive cell phone bills, and so on. The second option entails starting from scratch and examining our expenses to see if we might be able to renegotiate our current credit terms. This might result in a higher rate in the short-term, but if it comes down to deciding whether to starve or pay a marginally higher rate for a few months while we re-establish a steady stream of income, the choice should be an easy one. After we start on a plan of paying our bills, clearing the debts in full will seem like a long, drawn out process. Sadly, this is the truth. No change happens overnight, and paying our bills in full is no exception. In order to stay focused, we need to devise a strategy where we can not only see if we are on track, but also to see how a series of small steps leads to the giant leap of paying out all of our debt. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Chris's Debt-Blog targets people with Debt Trouble and helps them develop a Debt Elimination Plan. You can visit his blog at HowToRepayDebt.com. |