Debt Financial Planning
Let’s face it: debt conjures up negative associations, but there are many reasons why people fall behind on their monthly payments. For one, household income has been outpaced by other costs. The median household income has grown 28 percent since 2003, while medical costs and food and beverage prices have jumped 57 percent and 36 percent, respectively. This makes it harder for average American households to curb spending. As a result, they tend to lean on other forms of payment, like credit cards, to make ends meet. Regardless of the amount of debt you have, learning the ins and outs of money management, reducing debt and rebuilding your credit are within your grasp and will lead you to financial freedom.
Money management tips
The first step toward financial freedom is learning how to manage your money. People who have difficulty managing their money might have a problem recognizing when they are spending. Start by taking an accurate assessment of how and where you do your spending on a monthly basis, so you can figure out where to make cuts. Understanding how debt impacts your credit score can also be an important step toward financial stability–lenders offer lower interest rates to borrowers with good or excellent credit, which translates to lower monthly payments for you.
Getting out of debt
Getting out of debt isn’t an insurmountable task. The first step is understanding the different types of debt you have so you know which one to tackle first. A financial advisor or debt consolidation company can help you through the process of eliminating debt so you can finally have the financial freedom you crave.
Being in debt doesn’t mean you’re guaranteed to have a low credit score. However, having too much debt and not making debt payments on time can have a negative impact. According to NerdWallet’s study, the average American household with credit card debt makes interest payments totaling $1,292 every year. Learn how to rebuild your credit so you can get lower interest rates and spend less money on your debt payments.