Managing your finances can be a rather tricky process to navigate. With Federal Reserve reporting that the average amount of consumer credit debt per household stated at $15,112, as of November 2013, you are not online when it comes to fighting back against the wave of fiscal insolvency sweeping the nation. Adding in that the same study found the average mortgage and student loan debt to be $146,215 and $31,240 respectively, paints an even darker picture. Thankfully, you can make progress and get your finances back on the right track with the right approach and a sound fiscal strategy.
Building a Budget
Starting with a budget might seem small, but every little change in your daily spending can impact your long-term income outlook. A sound budget helps separate frivolous expenses and those that relate directly to essential services and goods. When creating this plan, don’t skimp on the details. The more information you add to the budget, the better your strategy is for saving money and controlling your finances. Although this might not be the most exciting part of rebuilding your fiscal position, it serves as a great building block for other parts of this process.
Refinancing Mortgages and Loans
Once you have a budget rolling strong, you can look to handle your bigger financial obligations by considering refinancing. Under this agreement you often extend the life of your contract in exchange for more funds and a lower rate of interest. While this can help you immediately with lower payments, you can also take the extra cash and put it toward paying down bills that tie into higher rates of interest. Effectively, you can make progress on two fronts whilst improving your financial situation dramatically.
Considering Debt Consolidation
Much like a loan or mortgage refinance, debt consolidation tools help to give you the extra funds you need to fight back against financial insolvency. On the creditor side of this transaction, by giving you the money up front to pay off other loans and bills, this organization or entity can guarantee that interest payments come into them instead of their competitors. As the recipient of these funds, you can put them toward agreements that incorporate higher rates of interest. Essentially, this can be a win-win situation for both parties, so long as you meet the predetermined requirements and approvals with the new creditor.
Starting a “Snowball” Plan
Even if you cannot refinance or create a debt consolidation loan package, starting a snowball plan can help you pay down debt and get into a position that will help you achieve approval on this other fiscal tool. Under this concept, you can put any excess funds to the bill or loan that has the lowest amount. Once you have paid off this obligation, the next lowest option on the list becomes the focus of your excess funds, plus the money put toward the prior loan or bill. This way, you gain momentum and make progress as you free up your financial position, and get closer to the end goal of complete fiscal independence.