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Sometimes it feels like there are two points of view on this question. Either debt, whether it’s a car note, mortgage or credit card bill, is just a part of life, or it’s not and should be avoided at all costs. So which is it?
Debt is not an inevitable part of living life in the modern world, but it’s not something you should consider evil, either. It can be a useful tool, especially for affording large-scale investments like real estate. However, you can strive to limit how much debt you take on throughout life with a financial plan that includes saving up for big purchases and having a realistic idea of how much disposable income you have available.
If you do have more debt than you prefer, you have a few methods for reducing the load. Look at the interest rates of your credit cards and loans to identify the highest ones. You can start tackling your debt by paying down the ones at the top of that list. Another way to get started is to begin with your highest balance account (a.k.a. the snowball method).
Create a budget to understand your total household income and outgoing expenses. You may not be able to predict unexpected costs, but having a handle on the regular outflow gives you better visibility into your financial health. You can put together an emergency fund that can reduce or eliminate the need to put one-off or infrequent costs on credit cards. You can also look into refinancing your student loans to lower your payments. We’ve made a list of the best student loan refinancing companies for you to review.
You can achieve a debt-free life and a better relationship with the credit that may become necessary throughout your life. By understanding how you can control or consolidate your debt and knowing what to do if it becomes too much, you can have significant power over your financial future.