As a business coach and Millennial, I am always researching strategies to improve my financial acumen and to empower me for even greater financial freedom. Sadly, I do not meet many other Millennials who share this belief or concern.
Research shows that more Millennials are taking steps to secure their financial futures. However, what we fail to realize is that if we don’t eliminate debt, we are not truly empowering ourselves for financial freedom.
Debt is burdensome; debt must be canceled before you can create a life of financial security.
Here's some fresh perspective on your finances and a debt prescription proposition to pay off your outstanding debts:
Create an effective budget once and for all.
While many will argue the necessity of a budget, I can offer numerous negative consequences of not having one. Budgeting allows you to track your spending. What you do not track, you cannot trace. In other words, you can only analyze what you have accounted for.
Write out a budget of all of your expenses. Be thorough and do not estimate. You cannot account for your finances without accurate information. You don’t pay your bills on assumptions and you should not create your budget without absolute accuracy, either.
When you are serious about getting out of debt, you will do responsible budgeting. According to Consolidated Credit, responsible budgeting is not just listing out your biggest expenses, but outlining your total expenses.
Take a day and go through all your bills and outstanding debts. Create folders, calculate totals and make spreadsheets that outline each expense.
When you have a clear focus of your financial goals, you are much more likely to accomplish them. This will not only help you to set an accurate budget, it will also empower you to make responsible investments for your future.
Assess your credit card debt.
While some will advise you to focus on your student loans, I do not agree with that perspective. You should focus on credit card debt first. Most student loans are not due immediately.
While you do not want to amass massive student loans, it would be more advantageous to attack smaller debt before you attempt to cancel larger debts. This sets a much more realistic expectation and rewards you on the journey to achieving larger financial goals.
Also, you will have to get disciplined with your credit cards; be mindful that paying the minimum balance is paying interest, not the principal.
Work on paying off your student loans.
Many have negative perspectives on student loans. While we understand that student loans are debts, we must also understand that student loans are not considered bad debt.
Student loans are set up on a lengthy payment schedule; therefore, they are often not negatively reflected on credit reports. This does not mean you should be negligent.
The more you prolong paying back student loans, the more interest you will create and the longer it will take you to pay back the loan.
Consolidating student loans is an option if you want to make your repayments more affordable. Ask your student loan provider about a couple of options; pay as you earn is an option that works with the borrower to ensure that the repayment schedule is reasonable.
Income-based repayment is an option contingent upon your income level. Public service loan forgiveness is an option available for student loan borrowers employed in specific jobs.
Most student loan providers will work with you to find a solution that is best for you.
Contact your student loan provider regularly and stay abreast about new offerings and developments.
Check your credit score.
Your credit score is very important. It is a key indicator of how financially responsible you are. Your credit score alerts creditors to how credit-worthy you are by how timely you pay your bills. You can go to www.creditkarma.com and get a free copy of your credit report.
Check your credit report for accuracy. Make sure you have not been a victim of identity theft. Check to make sure your credit report only reflects accounts for which you are responsible. The higher your score, the more likely you will be able to access cash when you need it.
Learn how to negotiate.
There is no law that says you cannot call your creditors and negotiate a better deal. In fact, you may able to negotiate lower payments at a lower interest rate.
Also, negotiation often leads to restructured payment plans. Be honest because often, creditors are willing to work with you.
Do not be afraid to negotiate because doing so can accelerate your debt cancelation process. If you follow these steps, you have a great prescription for eliminating debt and living a financially empowered life.
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