Welcome back to our series on how to be financially healthy! Now that you have a good handle on your expenses overall, let’s dive in a little deeper into one potentially big expense, DEBT. This may include student loans, mortgages, auto loans, and credit card debt aka consumer debt. Read on for 6 steps you can take to manage your debt and personal finances.
Know how much you owe and to whom you owe it to. Make a list of all of your loans. Include the creditors, total amounts of debt, monthly payments and due dates. This will help you visualize your debts and make it easier to create an action plan. You can use our Student Loan Calculator to organize your student loans and see how long it will take you pay off each loan.
Be conscious of your interest rates. Do you know how much you’re paying to lenders? Higher interest rates will greatly affect how long it will take you to pay off your loans and therefore affect your financial health. By knowing each interest rate, you can begin to make decisions to help your future self. You may also want to look into refinancing, more on that below.
How much are your monthly payments? Just because there’s a minimum payment does not mean that is what you should be paying. Monthly minimums are designed to maximize lender profits. Depending on your monthly payment, you could be only paying down the interest and not even touching the principal (!!).
Decide which debts you should pay off first. There are several schools of thought behind this. For example, you could pay off the debt with the highest interest rate first or pay off the debt with the lowest balance. The best method for you will depend on your personal financial situation and goals. Are you eligible for student loan forgiveness? Learn more about that here.
Know your refinancing options. There are many financial institutions that can offer you rates such as SoFi. Know your options and be mindful that applying for these options may affect your credit score.
Know your debt consolidation options. This is a good option if you have a manageable amount of debt and want to reorganize to pay it off faster. You are less likely to miss a payment if let's say three or four debts are combined into one monthly payment. You may be eligible for lower interest rates as well.
Debts can make up a large portion of your monthly expenses. Getting a handle on the details of what you owe can empower you to make good decisions moving forward. It can also feel liberating not to owe anyone money! If you’re looking for more information on how to tackle your debt, shoot us an email at info@goodcapitalinvestmentgroup.com. We would love to hear from you.
Coming up next, building your emergency fund. Check out our other blog posts here and sign up for our newsletter for more tips sent directly to your inbox.