Debt can eat away at your financial future and cause you to reach monstrous levels of stress and anxiety. You may have a mountain of debt that seems insurmountable, and you may feel challenged at the mere thought of taking action to eliminate it. These are signs that you may be feeling debt stress. Living with high levels of stress can negatively impact your emotional and physical health, your relationships and even your career. By following these steps, you can reduce your stress level while also managing and ultimately eliminating debt.
Consolidate Your Debt
Debt consolidation may be one of the best ways to deal with huge debt bills. You may be able to refinance collateral loans to obtain a lower rate, but unsecured debts should be consolidated. Ideally, these debts will be consolidated into a fixed term loan with a low interest rate. This can create lower and fewer monthly debt payments that are easier to manage. Because the debt is on a fixed term loan, the balance will be eliminated by the end of the loan term.
Create a Debt Reduction Plan
When you create a solid debt reduction plan, you can more easily establish realistic goals. You can also monitor your progress toward attaining these goals, and this can be mentally rewarding. A consolidation loan is a great first step at creating a debt reduction plan. In addition to focusing on this debt, look at your other secured debts. Using a debt snowball strategy is a great way to plan for debt reduction and elimination.
Focus on the Present
After you have developed a debt reduction plan, you need to focus your attention on the present. You may have adjusted your debts and have new payments to input into your budget. Your budget is an exceptional financial resource that you can use to keep you on track with spending and savings. Get in the habit of reviewing your budget daily. It may be wise to create a rolling budget that shows each pay date you will have and that allocates all of your expenses to be paid based on your pay dates. Some people will project their budget out by several months or years for the best results.
Reward Yourself at Milestones
It may have taken you many long years to amass your debt, so it reasonable that it may take as long to pay the debt off. Set milestones in your debt reduction plan, such as each time you pay off a credit card. Create rewards, such as a small trip or another incentive, that you can enjoy when you meet those milestones.
Increase Your Savings Balance
Focusing on saving money when your goal is to pay down debts can seem counter-intuitive. After all, you may feel as though all of your extra money should be allocated to debt reduction. Debt and savings are directly linked, and studies have shown that those who have higher savings account balances have less debt. Allocate a small portion of your available income each month toward savings. Over time, your balance will grow as your debts shrink.
Debt stress can be difficult to live with. It can keep you up at night, cause you to lose focus during the day and more. If you are challenged by debt and are looking for a way to reduce your stress level while managing your debt, consider implementing these tips in your life today.