Crafting a Realistic Debt Repayment Plan
When you live from paycheck to paycheck, so much of your energy goes to worrying about whether you have enough money to pay the bills that are due this period. You rarely have time to make long-term financial plans. In fact, even though you keep making payments, your debt burden might be getting bigger before your eyes without you realizing it. The first step to getting out of debt is to build a strategy. Yes, the personal finance experts will tell you that you need to earn more and spend less, but you are already putting all your efforts into doing that. Even though you do not have any free time, it is worthwhile to spend an hour taking a break from working on your current gigs and searching for additional gigs to think about how much debt you owe, whether you can come up with a feasible plan for paying it off, by making installment payments based on your current income or whether you need a bigger intervention. To discuss your options for debt relief that is more than just putting bigger and bigger shares of your meager paycheck toward your debts, contact a Boca Raton debt lawyer.
Figure Out How Much You Owe
The first step to debt repayment, and the scariest part, is being honest with yourself about how much you owe. This means adding up the total outstanding balances of all your debts. Yes, interest will continue to accrue even as you pay down your debts, but start by assuming that you will pay only the minimum balance on your debts each month. What percentage of your income does it take up? If you continue to pay only the minimum balance, how long will it take to pay down all your debts? Invariably, the answers to these questions will not please you.
Starting With the Snowball Method or the Avalanche Method
If you have even an extra dollar in your budget beyond the minimum payments, decide which debt will get the extra money, which one will be the first target for repayment. If you choose the one with the highest interest rate, this is the avalanche method. Mathematicians and economists prefer this method, because you pay the least amount of interest over time. They have not walked in your shoes, though. It is easiest to start with the debt with the smallest outstanding balance; this is the snowball method. Once the smallest debt is paid off, you have more money to put toward other debts.
Know When You Need a Bigger Intervention
With your low income and today’s high prices, you may be stuck in debt quicksand. One way out is to borrow more by taking out a debt consolidation loan, which is a low-interest rate loan that you use to pay off debts with higher interest rates. Another option is to discharge your debts in bankruptcy court or to offer to settle them for less than their face value by negotiating directly with creditors.
Work With a Debt Lawyer About Finding Solutions to Your Debt Problems
A South Florida debt lawyer can help you repay, consolidate, or discharge your debts. Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.
Source:
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