Should You Pay off Smaller or Larger Debts First?
We can’t tell you how to manage your money or how to pay your bills, but we can give you our favorite tips on how to do them effectively. It’s easy to feel overwhelmed when in debt and to feel unsure of which debts to pay off first. Do you pay off smaller debts and then tackle the larger ones? What is the most successful way to pay off it? New Era is going to answer these questions to help you determine which payoff method will work best for you.
Interest rates & balances
One of the most important factors to consider when paying off your debt is the interest rate. Credit cards are notorious for sky-high interest rates. The balances can seem insurmountable, especially as interest accrues. It makes the most sense to pay off the highest interest rate first, right? Some people may disagree and find that being able to pay off smaller debts is more rewarding because even though there are still larger debts waiting to be paid off, they are left with a sense of progress and accomplishment knowing they could pay off one account.
They call it personal finance for a reason: it depends on your situation. You’ll need to decide what works best for you. Either way, we applaud you for taking control of your debt and making an effort to decrease the amount you owe.
Consider the minimum payments
Maybe you are able to afford paying off more than one account due to excellent budgeting skills and the fact that you’ve been paying attention to our money tips! If that’s the case, you should try to make the minimum payments on more than one account to help decrease what you owe more quickly. With effective budgeting, you may even be able to afford more than the minimum to help yourself climb out of debt much faster. Remember: have a goal and stick to it.
Don’t forget about your savings
Don’t deplete your savings when trying to pay off debt; you always want to have an emergency fund. Life is unexpected and unforeseen costs can throw your life off course. Make sure you can afford to make payments each month without having to borrow from savings. Know that paying off debt is going to take time. You don’t want to spend all your savings on debt payments only to find that you won’t have enough to keep making the minimum payment. Slow and steady wins the race! Stay focused and take the smaller details of your personal finances into account.
Make a plan
It’s much easier to accomplish a task when you’ve got a plan and aren’t improvising as you go along. When you know exactly how much money you have coming into your accounts each month and how much is leaving them, you’ll have a better understanding of your finances. Technology makes it easy to create budgets or make a financial plan. All you have to do is input a few numbers into an app and link it to your bank account. There aren’t many excuses left. Success arrives when you work hard and stick to a plan. It’s never too late to plan – get started today.
You can always call us. We’d love to speak with you to help you figure out what debt reduction option is best for you. Contact New Era Debt Solutions today for a free consultation so we can lead you to the road to financial freedom.