Stress can come from many different places: your family, your job, and even your money. Sometimes, it’s your lack of money that causes the most stress, especially if you get into debt. Whether it’s the high cost of living, low wages, carrying a high balance on credit cards, or late payments on bills, debt stress can be overwhelming. But you can get a hold of your debt stress by taking these five steps to manage your financial health. Along the way, you may be able to improve your overall health as well.
1. Don’t ignore it
Facing your debt stress might be hard, but avoiding the issue pretty much guarantees you won’t ever solve it.
Instead of being in denial about your debt stress, figure out what’s causing it. What’s going on when you’re feeling it most? Is it when you open the mailbox to find overdue bills? When you check your bank balance and it’s much lower than you thought it was? Is it when you go to the grocery store and can’t afford all the things you need?
Recognizing why you’re feeling that debt stress is the first step to getting power over it—and over the debt. Rather than being ignorant about how much money you owe, take a good look at how your spending and income are impacting your life.
2. Take ownership of your debt
Putting the blame on others can seem like it lessens the impact of your debt, but now is the time to accept that it’s your debt and you’re going to get a hold of it.
To start taking control over your money woes, look at each debt you have in detail. It might help to make a spreadsheet or list them out so you can see how much you owe the lender or creditor, what your monthly payments are, the interest you pay (if any), and the due dates.
This part can be overwhelming. But taking it all in — and one step at a time — is important to manage your debt — and your debt stress.
3. Create a repayment plan
The most important thing you can do is immediately start making minimum payments on all your outstanding debt every month. If you need to make room for these payments in your budget, start cutting back costs where you can. For instance, you may not be able to dine out as much as you did before, and you may have to create meal plans and set a grocery budget every week or month.
Sign up for auto-pay or create calendar reminders to make sure your bills are paid on time every month. Otherwise, you’ll suffer from compounding debt, where your late payments trigger fees and finance charges, adding even more to the debt you already owe.
4. Find a debt repayment method
When it comes to paying off debt, what works for some doesn’t necessarily work for others. Explore some of these options to see which one feel right for you:
- Debt avalanche method: This is when you focus on repaying the debt with the highest interest first. You’ll make minimum payments on all your outstanding debt, but put all your extra cash towards the debt with the highest interest. Do this until that debt is paid off, and then put all your extra money to the debt with the next-highest interest.
- Debt snowball method: Instead of focusing on the highest-interest debt, you’ll look at your lowest debt first. Make minimum payments on all your outstanding debt, then put your extra cash towards the debt with the lowest amount due. Once that’s paid off, you’ll focus on the next-lowest debt until all your debts are paid in full.
- Debt consolidation loan: This is when you take out a personal loan to pay off all your outstanding debt, then make one payment every month to your new personal loan. If you have many different types of debt, like a mix of loans, credit cards, and medical bills, a debt consolidation loan can help you remove the stress of managing many different payments at various times throughout the month.
- Balance transfer credit card: If the majority of your debt comes from credit cards, you can apply for a balance transfer card. These are cards that offer free balance transfers and promotional 0% APR for a set amount of months, usually 12-21. Keep in mind that balance transfers don’t always move over the full balance of what you owe, which means you could get stuck paying off your new credit card as well as your old ones. There may also be a fee on the transfer, for example, 3% of the balance.
5. Ask for help
Don’t be afraid to seek out help when you need it. You might want to explore debt settlement options or find a debt relief program. If you aren’t sure how to handle something, there are people who are available to help you navigate your debt and lower your debt stress.
Managing your debt can be confusing, but you don’t need to go through it alone. Getting the help you need might be the biggest differentiator between living with debt stress and overcoming it.