At the best of times, consumer spending can lead to runaway debt. In 2020, however, soaring unemployment has led consumers to borrow just to meet basic needs. Consider how two countries can highlight the consequences of both current and ongoing individual borrowing concerns: in the U.S., debt rose to $14 trillion for the first quarter during a coronavirus-focused 2020. In Norway, debt averaged 225% of personal income in June 2018, an economically sound time period.

Debt can seem an insurmountable challenge, especially when you compound it by increasing your borrowing. You can easily be overwhelmed and stressed by a huge debt on loans and credit cards. There are ways out of that mess, starting with changing your mindset to one of disciplined spending. With these carefully planned, long-term action steps, you can eliminate the burden and begin to manage your finances healthily.

Create a Spending Outline

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By far the most important first step you can take is to set up a monthly budget. Unfortunately, many people don blinders every time they pull out credit cards. A budget serves two purposes. First, it serves as a symbolic statement. Setting up a budget is an active process whereby you are taking charge of your money, declaring ahead of time where it will go. Second, it is a practical undertaking: A physical budget provides a visual template. You can see where you have must spend minimally to pay bills – hence, monthly.

To do so, gather bills and all other financial paperwork. Use a spreadsheet to set it up; many are available online. Do not forget to include quarterly and annual bills; break these down into monthly payments so that you are not surprised when they come due. Your budget will not only emphasize where you should spend but also track your deviations. Building a visual history is a way to remove the blinders. Budget-building is useless, however, if you do not stick with it, in which case your debt will grow. Spend only what you budget for, other than unexpected emergency payments.

Tighten Your Belt

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You must be honest when you create the budget; do not leave anything out. Some categories are flexible; you can build up a profile for monthly food spending, for example, only over the course of a few weeks of spending. Others line-items are fixed, such as utilities. In either case, decide where there are fixed or flexible things you can eliminate, such as cable contracts or entertainment spending. Here you need to decide which is more important, getting control of your spending, or continuing to pay for luxuries.

While you are at it, look around your rooms, basement, and attic with a critical eye – what goods can you part with? Likely your dwelling is overstuffed with objects you would never miss if they were gone. Have a sale. You will be surprised at the money you can make, and you will accrue the benefits that come from living in a less-cluttered environment.

Generate a Payoff Plan

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Begin to payoff your debts using the snowball approach. Pay off your lowest-interest debt first applying monthly contributions; ideally these balances will be those with lower monthly payments. Once you have payed that debt portion off, put those monthly allotments toward the next highest interest loans; these payments can be larger since you will no longer be contributing to the first, now closed accounts.

Be aware that you must pay above the minimum interest, or you will find it will take many years before you will make your final payment. However, when you have satisfied some of your outstanding debts, you will begin to show a pattern of repayment that looks more attractive to lenders.

As an aside, there is one critical action you do need to take as soon as you can during at this time: When you can do so, set up an emergency fund, and add a little to it each month. This fund will give you the freedom to pay cash for an emergency, such as a broken appliance, preventing your needing to borrow more unexpectedly.

Refinance at the Right Time

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As you get your spending under control and cut into your debt, you will find your remaining obligations to be those with higher interest rates attached. At that time, consider refinancing some or all of your consumer debt into a single, lower-interest consolidated loan or credit card. As a result of your lowered interest, you will be able to put a larger portion of your snowballed monthly payments toward the principal on your loan balance or credit card payments.

When you refinance, apply for a fixed interest-rate option. Otherwise, your variable rate can balloon past the high rate with which you are already encumbered. Additionally, compare any fees with those that you are paying on your current combined loans and credit cards. Click here for more info on debt and refinancing.

Create a Spending-Method Plan

Now work with only the one, lower-interest credit card as necessary. Ideally, you would use the card primarily for automatic payments on recurring monthly bills, and then you would pay off the full credit card statement each month. Unfortunately, people often open new credit cards at stores in order to get a discount on purchases, a shortsighted action. Though you may not be able to open a new account based on your current credit standing, even if you can, to do so would be a poor decision.

When possible, pay for groceries and other items with cash. The physical act of paying this way can actually reduce your total spending and lead to a greater appreciation of each purchase. Once you make this payment-processing change, it will become a habit, one that is part of your growing positive spending mindset.

Partner With an Expert

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Once you have reached your goal of paying off your outstanding debts, you have an opening to build wealth and security. Plan to work with a financial advisor, preferably one who works for a flat fee rather than a commission. Advisors who represent themselves as educators will be ideal for you in your situation. Visit this site

After all, your goal moving forward is not only to avoid debt pitfalls in the future but also to put yourself on strong financial footing. Because you worked so hard to eliminate your debt you should be able to achieve financial security.