77% of Americans are in debt, according to the Northwest Mutual Planning and Progress 2018 survey. Debt is one of the key players in today’s financial landscape. It impacts what you are able and unable to do. But being in debt influences more than just your finances, it also plays a significant role in your emotional and mental wellbeing.
On average, 85% of people reported being stressed out about money. This stress comes in many forms but in nearly every case, that stress was related to debt: student loan, credit card, personal loan, car payment, mortgage. Debt may come in many forms, but it affects people in similar ways from stress to anxiety to depression to fear.
As the number of people in debt continues to rise and the studies about the effects of debt have continued to become more widespread, how can we talk about debt in a meaningful, productive way?
Here at Wealth Habits, it is important to us that you be able to reach your personal and financial goals and debt can be a huge roadblock standing in the way of those goals. That is why we wanted to take some time today to talk to you about prioritizing your debt repayment to get you out debt and start living the life you have designed.
Get The Big Stuff Out Of The Way
Sometimes when people have debt, they feel overwhelmed, stuck, and unsure what their next move can be, which can delay action and accumulate more debt along the way. It is alright to feel overwhelmed by your debt, but it is important not to let your debt own or define you. To help, make a list of all of the debt you have.
Remember, there is good debt, like a manageable mortgage, and bad debt, like credit cards. By seeing all of the debt you have, you will be better able to make a plan of how to move forward. You can’t move forward without adequate information which is why it is essential that you know the type of debt you have, how much you owe, and the interest payments associated with each. Once you have this list, where do you go from here?
The best place to start is at the top: take action to pay off the high-interest debt first. When you prioritize your debt with the highest interest payment, you are making proactive steps to getting yourself out of debt. Credit card debt, for example, often has exorbitant interest and fees. Paying this off first is a great way for you to pare down your debt while not accumulating massive interest payments along the way.
Create A Budget and Payment Plan
You know all of the debt you have, but now you need a plan to pay it off. You can start by taking a look at your budget. If you don’t have a budget yet, now is a great time to create one. Take a look at your monthly expenses and keep an eye out for places you can cut back. Maybe you pack your lunch as opposed to eating it out, curb your entertainment expenses, or be savvy about your utilities. After some digging and thinking, you will be able to find places to cut back.
Once you narrow down your budget, use that extra money to make payments toward your debt. Working your debt repayment into your budget will help you stick with it and make it a part of your monthly habits. Creating this budget is one thing, but it is even more important to stick with it. How can you do that? By including debt repayment in your financial goals.
Debt & Priorities
Money is only half of the picture of debt, the other half is emotion. These two entities bounce off of each other in every financial decision you will make. It is especially important, where debt is concerned, to check-in with yourself on your financial and emotional wellbeing. Debt is hard, and you won’t be able to fully embrace a debt-free life if you don’t commit to paying it off.
You know what you have to do. You’ve made the list, you created a budget, now it is time to follow through. Most people are able to follow through with something when it matters to them, when it is a priority: make debt repayment a priority, a goal, a value.
Debt can weigh you down both emotionally and financially. We love to see our clients succeed and one of the best ways to do that is living a debt-free life. Are you ready to prioritize your debt repayment but are unsure where to start? Give us a call and we will be happy to help you get on the right track today.