William Shakespeare has many sought-after wise quotes, but only one deals with personal finance. In Act 1 Scene 3, HamletPolonius bids farewell to his son Laertes.
Neither the borrower nor the lender, because with loans you often lose both yourself and your friends.
Perhaps Polonius never tried to buy a house, and this was in the 17th century, so he didn’t want to buy a car, or a fancy vacation, or a higher education for Laertes, or any modern convenience. did not do it. Polonius certainly gives good advice, but in today’s world it’s unrealistic advice.
These days, everyone who can borrow finds themselves in debt for these and other purposes. One thing many of these borrowers, especially younger ones, learn too late is how to manage their debt.
according to bankrate.comIn 2022, most Americans carried at least one credit card with an average card balance of $5,589. In fact, the average American’s debt is $96,371. It is a large amount of unsecured debt that pays interest. The Federal Reserve Bank of New York reported that American credit card debt alone will total $986 billion by the end of 2022. Given the economic situation, this amount is unlikely to decrease anytime soon.
So how do you manage your debt? Proper financial planning and strict budgeting are the cornerstones of debt management. The ultimate goal is to pay off all your debts so you can live a more comfortable and secure life. The less debt you have, the more money you have to spend. The more debt you have, the less money you have to spend because a significant portion of the money you have will be used to pay off your existing debt.
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discipline pays off
How do you manage your debt? Most people follow the do-it-yourself method and use a portion of their income to pay off debt. You’ve been disciplined, and that discipline can improve your credit score, which can result in lower interest rates when you borrow for big purchases, such as a mortgage.
Some people turn to credit counselors who get paid to help those struggling with debt better manage the repayment process. You will be sharing your financial hardships with strangers trained to help people like you reach their debt free goals. We set timelines, help estimate payment schedules, and suggest plans to reach your goals.
However, some debt management plans require payments to the agency, which are distributed to various creditors according to plans made by the agency. This methodology can and does work, but it gives you less access to your own money because you are contractually obligated to follow the plan.
Before we go that far, here are a few techniques you can try yourself.
- Pay more than the minimum payment amount. You’ll be able to pay off your debt faster while dramatically improving your credit score.
- Try the “debt snowball”. Pay off the smallest debt first, then use the funds you paid to that creditor to make additional payments on the next smaller debt. As this process “snowballs”, you will pay each creditor more and more money until most, if not all, of your debt is paid off.
- Refinance your existing debt at a lower interest rate. A debt consolidation loan may be your best bet here. You can make fewer payments and ultimately pay less interest.
- Use your unexpected luck to pay off your debts. These include tax returns, inheritances, and cash sources not currently in the budget. You may miss a vacation or two, but you’ll be able to pay off your loan sooner.
- Finally, reconsider your finances to see if there are ways you can readjust your cash flow to put more effort into paying off your debt. (In any case, it’s a good idea to review your budget regularly.)
Whichever method you choose, you’ll be able to pay off your debt faster and keep more of your hard earned money. Polonius would be proud of you.