Contributing author: Debt settlement in a smart way

Photo courtesy of Pabitra Kaity / Pixabay.

Being debt free is a worthwhile endeavor. But with mortgages, car payments, credit cards and student loans, this is often unrealistic. However. Debt management is usually possible.

These tips can help you get started.

Analyze the situation: Calculate how much and what kind of debt you have either by writing it down in pencil and paper or by entering the data into a spreadsheet like Microsoft Excel. You can also use a bookkeeping program such as Quicken or a debt management application such as Debt Manager, Debt Payoff Planner or, if you are only concerned about student loan debt, the Changed application.

When compiling or entering your list, be sure to include any items you can think of where a company has given you some down payment such as a mortgage, car payment, credit cards, tax liens, student loans, PayPal Credit and store payments or cards.

Record the day the debt starts and when it will end, along with the interest rate you pay and the standard payment amount. Then add them all. The goal is to break it down into manageable pieces, while finding extra money to repay.

If you are one of the millions of people who lost their jobs during the coronavirus pandemic, many car and student loan lenders, as well as mortgage and credit card issuers, offer temporary concessions. Before making any payments, call or visit their websites to see what their policies are during the pandemic and if there are options for deferrals and other steps you can take.

Identify High Cost Debt: Even if you have not lost your job or have had a Covid-19-related illness, it never hurts to determine which debts are more expensive than others and pay them off first. The worst culprits are consumer debt, such as personal loans, car loans and credit cards with high interest rates.

Credit cards are easier to handle, so get started. When repaying this debt, remember these tips:

  • Do not use them. You do not need to cut them, but take them out of your wallet, put them in a drawer and access only the one with the lowest interest rate in case of emergency.
  • Determine the card with the highest interest rate and pay as much as you can each month and pay the minimum amount due on other cards. When this is paid off, work on the card with the next highest percentage.
  • Check your credit cards for balance transfer rates and transfer balances from higher interest accounts to lower interest accounts. When you pay less interest, you can pay off your debt faster. The catch is that at the end of the balance transfer period (usually six to 12 months), the low or zero interest rate returns to a higher credit card interest rate.
  • Do not close existing cards or open new ones. It will not help your credit rating and may even hurt it.
  • Pay on time, absolutely every time. Late payments – even one – can lower your FICO rating.
  • Look at your credit card transactions in detail and look for monthly charges for things you no longer use or no longer need.
  • Call your credit card companies and ask them kindly if they would lower your interest rates – sometimes it works.

Save, Save, Save: Do what you can to get rid of debt, even if it means reassessing your priorities and changing your lifestyle. Consider getting a second job and using this income only for higher payments on your financial obligations. Replace free family activities with high cost ones. Sell ​​high value items that you can live without.

Never miss a payment: Not only do you get out of debt, but you also build amazing creditworthiness. If you are buying a house or car or renting an apartment, you will want to get the best possible credit rating. A flawless payment file will help. In addition, credit card companies can quickly raise interest rates due to a late payment and a complete loss is even more serious.

Pay in cash: To avoid increasing the debt burden, make it a habit to pay for anything you buy with cash or debit / credit card.

Shop wisely and use your savings to pay off debt: If your family is big enough to guarantee it, invest $ 45 to $ 60 and sign up for a store like Sam’s or Costco and use it. Shop there first and then at the grocery store. Change brands for a better price if needed. Use coupons and save savings clubs religiously. Calculate the money you save and use it to pay off debt.

Remember, every penny counts and even if it is a small amount each month, the steady savings increase over time. But if you have debt problems that are not easily solved, then you should consider talking to a financial professional.

Norman G. is a Managing Partner at Grill & Partners LLC, a chartered accountant and consulting firm, and high net worth individuals with offices in Fairfield and Darien.

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