Home Financial consultant Drown in debt? Here is the first step you should take

Drown in debt? Here is the first step you should take


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It’s easy to get overwhelmed with debt. Unpaid student loans, a constantly growing credit card balance with high interest, a monthly car payment: these are just a few reasons why young consumers feel like they have a huge financial burden on their money. shoulders.

In fact, a survey by Select and Dynata found that almost half (44%) of 18-34 year olds feel like they are “drowning in debt.” While it may seem difficult at times to see a light at the end of the tunnel, the best decision these indebted adults can make is to just make Something, argues Kristen ricupero, financial coach and consultant at Financial fitness coaching.

“It doesn’t have to be big to be effective,” says Ricupero. “Money is more emotionally and behaviorally charged than numbers.”

His point is that your debt repayment journey can start with small victories, such as applying for a little saving you have on your credit card balance or cutting costs to find cash. additional. This can motivate you to take the next step, and so on until your debts are a thing of the past.

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Your first step: do something, no matter how small

A lot of people feel like they can’t move on and achieve their life goals because they have too much debt. But keep in mind that any a small step in the right direction can help get you on the right track.

“Too often the problem of feeling burdened with debt is not because we don’t earn enough money to eliminate it, but because we don’t know where to start or where our money is going,” explains Ricupero.

If you feel like you’re in debt, she encourages you to start by just looking at your bank account so you can better understand your past spending. This can help you see your shopping habits and reveal categories where you may be able to reduce your spending. One of the goals is to find the excess money that can be used to pay off your debt.

Then choose a debt to repay

Most people who feel overwhelmed with debt have balances on multiple accounts, whether they have more than one credit card, student loan debt, or a large car loan. Sometimes it can be difficult to prioritize what to pay first.

You must do at least the minimum payments on all your other debts to keep your accounts up to date and your credit score stable. After that, figure out the best debt repayment plan for you.

You can choose to pay off your smallest balance first (snowball method) or focus on the debt with the highest interest rate (avalanche method).

Once you’ve determined how much extra money you need to spend on your debt, Ricupero recommends that you allocate it to just one balance. Spreading that extra money to pay off multiple balances at once is one of the “biggest mistakes” she sees that keeps people in debt longer.

“The impact on capital is greatest when you put everything on one debt,” says Ricupero. “You’ll progress faster, which will make you want to keep going when you focus on one at a time. “

If you have credit card debt, consider this third step

If you wear a revolving credit card balance, you might want to focus on that first, given the noticeably high interest rates on credit cards. “Interest can quickly get worse and grow each month,” says Leslie Tayne, a debt relief lawyer at Tayne Law Group.

Consider getting a credit card with balance transfer. When you make a balance transfer, you are transferring the debt from a credit card to a new card that offers a low introductory interest rate period or 0%, which typically lasts six to 21 months. During this period, you will not have to pay additional interest and you will be able to benefit from your payments which will be entirely allocated to your principal balance.

the Citi® Diamond Preferred® Card has a 0% long APR on balance transfers for the first 21 months, which is almost two years (after that, 13.74% to 23.74% variable APR.) Keep in mind that all transfers must be made within the first four months of opening the account, and there is a balance transfer fee of $ 5 or 5% of the transfer amount, whichever is greater.

the Citi® Double Cash Card offers no interest for the first 18 months on balance transfers (after, variable APR from 13.99% to 23.99%; balance transfers must be completed within four months of opening the account.) An introductory balance transfer fee of 3% of each transfer ($ 5 minimum) applies; after that, a balance transfer fee of 5% of each transfer ($ 5 minimum) applies. The Citi Double Cash card also has a cash back program where cardholders get 2% cash back: 1% on all qualifying purchases and an additional 1% after paying their credit card bill ( you do not earn any reward on transferred balances).

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Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.

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