When you have extreme debt it can feel debilitating to tackle the problem. The high interest rates and seemingly endless fees can cause major depression, which tends to make people postpone a good debt management plan. To take control of your finances, it’s important to face how you got into debt to begin with. This will help prevent it from happening again. If you use a credit card for medical bills, there is not much you can do to mitigate your debt. Unfortunately, a credit card can be the only option for those who become ill. Prioritize finding a job with good health insurance whenever you can. If you have accumulated significant personal debt on your credit card, get out of it before it bogs you down.
Major Loans
1. Cars
Cars are important in places without good public transportation. However, buying a car can be a temptation to overspend. A car depreciates as soon as you drive it off the lot. Consider a used vehicle or a smaller one.
2. Mortgage
Most people pay more on their mortgage than any other bill they owe. Owning ahome is a great thing; you just need to ensure you did not bite off more than you can chew. Try to refinance if you are already having difficulty paying, or rent unused rooms.
3. Student Loans
The student loan debt crisis is vexing and it grows worse every day. If you are contemplating student loans, make sure you understand the repayment terms and be careful of colleges which oversell the probability of getting a high paying job. Community colleges can be just as beneficial to your employment prospects for less tuition.
Credit Card Debt
4. Food
Credit cards are not all bad. They can be useful to build credit and for emergencies. However, you should resist the temptation to use the credit card for things like eating out. Based on the amount of interest that you carry over each month, you might wind up paying for a $35.00 meal three times over.
5. Entertainment
Using a card for entertainment is not always a mistake. But a movie and a night on the town add up if you do not pay them off until the next billing cycle.
6. Emergencies
If you use a credit card for medical bills, there is not much you can do to mitigate your debt. Unfortunately, a credit card can be the only option for those who become ill. Prioritize finding a job with good health insurance whenever you can.
7. Getting Married
Going to the chapel shouldn’t be a major life expense, but the wedding industry has turned into a multi-billion-dollar industry. That means many people wind up going into debt, with credit cards, to afford fancy dresses, expensive decorations, a top-notch venue and food for the receptions. Don’t turn your wedding into a commodity. Instead, make the wedding a budget affair that is small. Never go into debt for engagement rings and wedding dresses.
8. Taxes
Owing back taxes can be a significant blow, and many resort to credit cards to pay off the government. If you make this choice, be sure you get a card with a low interest rate, or transfer to a card with low transfer rates.