For many consumers trying to make headway in repaying their debt, determining where to start is often the most difficult task. Many families are attempting to gain control of their finances by reducing expenses, eliminating debt and bulking up the savings account. With so many goals it is easy to become overwhelmed and fail in one or each of these categories. If you are committed to reducing your debt, it is imperative to prioritize your debt for the best results.
Create A List Of Your Debts
Before you can get started repaying your debts you must first take some time to get organized in order to see how much money you owe. While credit card debt is normally the biggest concern, you will want to list all debt to see the big picture. Some of the statements you will need to make this list include credit card bills, car and student loans, mortgage and home equity loans, medical bills and tax bills. Once you have your list and are ready to tackle your debt, consider the following questions: which debts should you pay off first and how much should you pay on each debt, each month.
Prioritize Your Debt Payments
There are several different strategies that you can employ to reduce your debt. Most advice for debt elimination suggests prioritizing by either interest rate of total balance. If you opt for paying by interest rate you will start with accounts having the highest interest rate and begin aggressively paying off that account. You would continue paying on that account until it is paid in full, then begin on the next account. While this makes the most sense when it comes to numbers, it may take longer to see results which is why some people begin by paying off the account with the smallest balance. In doing this, you will see results sooner which inspires you to continue in your debt elimination plan.
The real key to success is having a strategy that works for your unique situation. Staying motivated is a huge part of successful debt elimination and in some cases the process can take a long time, which makes seeing progress important to your overall moral.