When facing uncertainty about how the economy will recover, its essential to get your finances in order. Surprisingly, average consumer credit card debt has decreased since January by approximately 14%. Dedicate your energy to paying off debt so you can free up more money for emergency funds.
· Take the time to create a repayment plan and find times you might be able to pay more than the balance due.
Make a strategy for how you will pay off each debt or how you will consolidate them. Having a plan will keep you mindful of how you are prioritizing your money and increase your chances of success. The most common ways of eliminating your debt is the snowball method-paying off the smaller debt first. You may also consider the reverse strategy called the avalanche method. With this you pay off your debt in the order of interest rate, starting with the highest. You could ideally save the most money over time by tackling the high interest rates first.
· Contact your creditors and see what relief options they are offering
Review your debt sources, make note of your interest rates, and reach out to your lenders. (As a client of ASJ you have access to a free debt calculator to assist you with tracking this information). Many creditors are willing to offer their customers a break on repayment. Many banks are offering fee waivers, deferred payments, and credit line increases. Since the odds of default are likely to increase during the recession, credit card companies are much more willing to work with you.
· Consider an extra source of income
Finding other ways to earn money can help speed up the debt payment process. More of us are home and many are not currently working their standard jobs although many companies have conformed to offer home based positions, even if temporary through this pandemic.
There are also other jobs available such as delivery services like Uber, Instacart or DoorDash. These companies are usually always hiring and with more people home and social distancing more delivery drivers are needed. It also gives you flexibility that allows you to work during the days and times you prefer or are available.
· Minimize your spending
With work from-home and social distancing measures, many people are saving money on transportation costs and spending less on entertainment and fast food. Try to implement smaller changes that can have significant impacts such as cook at home verses ordering delivery. Cancel subscriptions you don’t need or use. Downgrade your cable and maybe consider less expensive services such as streaming Netflix, Hulu or Amazon.
Focus on paying down debt and try not to add to it. Ensure that you have requisite income to cover your expenses and that you are not supplementing with credit cards or your overdraft account. By having more time, it can help you to reevaluate where your money goes and what you can eliminate or minimize. You can apply the freed-up funds to federal loans that have no interest right now, build an emergency fund, and have cash in the bank or pay off high interest debt.
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