How to Create an Action Plan to Tackle Debt

When you’re struggling with debt, it’s important to remember there is a light at the end of the tunnel. If you handle your debts well and manage your money carefully, you can create a financially brighter future for yourself and your family. But this doesn’t happen overnight – and it doesn’t happen without some effort and perseverance on your part. You’ll need to take some steps to create an action plan for tackling your debt. Here’s a brief guide on how to do so.

Identify and Prioritise Your Debts

A monster you can see is always less frightening than one shrouded in darkness. Make a list of your debts, including relevant details for each one such as the amount owed, amount paid off so far, interest rate, and lender. When you can see the facts laid out plainly, you’ll be able to develop a comprehensive understanding of your situation. This will also help you to prioritise which of your debts need to be addressed most urgently.

Understand Your Income and Expenses

Without fully knowing the numbers that are coming in and going out of your household, it will be nearly impossible to properly manage your debt. Collate your paycheques and bank statements from the past three months or so and analyse your income and expenditure. When doing this, take note of how reliable and consistent your income is, as well as noting which of your expenses are fixed and which are discretionary.

Rethink Your Budget

Once you’ve got a clearer image of your finances, you’ll be in a good position to consider your current budget and work out how it can be improved in order to help you tackle your debt. In particular, look for expenses that can be reduced or eliminated altogether. It may seem like you have to make some tough decisions, but keep in mind that these sacrifices could just be temporary; once your debts are gone or less intimidating, you can bring some of those luxuries back into your life. Things you might be able to enjoy less often for now include dinners out, takeaway coffees, subscriptions to pay TV, or new outfits – this will depend on your unique circumstances.

Speak with Your Lenders

While unpaid debts are stressful for you, they’re also bothersome for the organisation(s) you owe that money to. That said, there’s no harm in contacting your lender and discussing your situation with them. Some lending institutions will have systems in place to assist those struggling to pay off debt, while others may simply provide guidance to you. You can also consider reaching out to a third party that specialises in debt management, such as Debt Rescue.

Even though developing an action plan may not have an immediate effect on your debt, there is no doubt that this is an important step to take. Analysing your finances, rethinking your budget and contacting your lenders will help you get back on track. Plus, doing these things will keep you focused on what you need to achieve while also helping you feel in control of your life during this less-than-ideal time.

What’s been an integral part of your debt-tackling action plan? If you can add anything valuable to the points above, please don’t hesitate to do so; you never know how many readers could benefit from your insight or advice!

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