Paying back debts is a very popular subject these days. For instance, look at the many debt consolidation companies that exist today compared to 30 years ago. There was not a need for them like there is now. Considering the state of the economy for the past few years, is it any wonder debt repayment is a hot topic? However, there are several confusing messages when it comes to debts and debt repayment plans. If you are in a similar situation, how do you know what will work and what will not? If you use common sense, you may be able to figure it out on your own. In the meantime, here are some common sense ideas to speed your process along.
Where to Start
Often, when people are trying to get a grip on their finances, they get lost not knowing where to start. Like a song from a popular movie, “Start at the very beginning; a very good place to start…” Where is the beginning? Analyzing your situation, of course. This will involve getting real about how much you owe, to whom you owe it to, what your monthly bills come to, and what your total income looks like. When you have done that, you can then begin creating a plan.
The Next Step
Once you have analyzed your situation, it is time to create possible scenarios of what your debt repayment plan will look like. A possible scenario may be that you aggressively pay back your debts, while cutting back on other, non-essential, expenses. Another one might be to pay a little less on your debts while keeping some non-essential expenses in your budget. With each scenario, project out how long it will take you to pay off each debt. Doing this will help you to choose which scenario you want to go with.
Choosing a plan will not be that easy, but is a very essential step in the debt repayment process. After committing to a plan, you must follow through with it. Otherwise, a debt repayment plan will remain a plan on paper only, and you will not reap the benefits of it. On your very next paycheck, make the necessary payments according to your plan. Theoretically, this should get you out of debt pretty easily. However, life does not always work that way.
Evaluate and Adjust
After about 6 months, look at your plan and the actions you took. Did you make any headway on clearing your debts? More importantly, was the plan workable? Were you able to make the payments on time, and still lived comfortably? If you answered negatively, then you need to readjust your plan so that you can handle all expenses comfortably. Of course, if your plan is working well, there is no need to adjust it. A plan that allows you to pay off your debts within two years and still live comfortably is a plan that will work in the long term. Just as with weight loss, any eating plan that allows you to indulge once in a great while, while still losing weight is one that will work in the long term.