Set up a debt repayment plan if you are planning on becoming debt free.
Debt repayment plans will also motivate you as you can continue to monitor your progress.
One of the most important things is that by setting up a repayment plan you can start focusing on your debts one by one and you will be amazed, you will get rid of all your debt systematically and quickly.
In here we will share easy steps to set up your debt repayment plan:
List all your debts: List all your debts from top to bottom; these debts should include the minimum amount that you can pay for a debt, the interest rate applicable on the respective debts and the total amount of your debt. The list must include all your unsecured debts such as car loans, credit cards, home loans, personal or professional loans, this list must also include names of friends and family members if you owe any money to them.
Set payment priorities: You can prioritize any debt before others, but experts say that either you should categorize your debts based on the interest rate, that is, the debts that have the highest rate of interest should be kept above in the list and others should be placed accordingly, this helps in saving the extra interest amount that you will be paying during the repayment tenure.
One other option that you have is, you categorize the debts from the smallest amount to the highest amount, and this will help you in generating traction before you start repaying the big debts.
Surplus money and debt repayment: There are two methods to generate surplus money that can be used further in repaying your debts. The first one starts by cutting off your expenses by only spending on necessity or utility goods and services, and spending on necessity or utility goods never means that you can spend more on them. Be creative reduce the consumption of electricity so you need to pay less, maintain a healthy lifestyle and this will reduce the monthly health-related expenses, and many other ways to cut short your monthly expenses.
The second option is to generate surplus amount by joining a part-time job, in addition to your existing job, or you can talk to your company and see if they allow an overtime shift to generate extra income. Both the options discussed will enable you to generate a surplus income that will help you repay your debts quickly.
One at a Time: Earlier you created a list categorizing the debts from top to bottom, now with the surplus amount in your hand, start paying the first debt that you have on your list, focusing on one debt at a time and this will help you pay off the debt in a much quicker time scale.
When you try paying all your debts together the impact is reduced, and you always feel overburdened as your interest from all the debts keeps accumulating.
Move on: Once you have paid the first debt on your list move on to the next one, keep repeating the same process and you will be amazed and within no time you will pay off all your debts one by one.
Savings: After you are done with all your debt repayments, focus all your attention on how you can generate a future fund for yourself to avoid any future debts.