“Right now, many Americans are a medical emergency or a natural disaster away from bankruptcy,” says Debt.com chairman Howard Dvorkin, CPA. “Their finances are so precarious, any income disruption or debt addition would push them over a cliff.”
The Big Picture
In a period of high inflation and interest rates, it’s more important than ever to kick down debt and build up savings. Debt.com found that 35 percent of people owe more debt than they have in their emergency savings.
Add Up Your Debt
Comb through your accounts and get an accurate assessment of what you owe. Take note of the debt amount, interest rates, and how many payments you’re behind on. Debt.com even has a free debt worksheet to help you track it all.
Review your credit and budget
This might seem basic, but having these numbers down can help you. With your up-to-date credit report, you can gauge what kind of debt repayment plans you might qualify for.
Pick a Method of Attack
Once you know how the money you have coming in compares to what you owe, you can devise a perfect plan. And if you read this list and aren’t sure, it’s always a good idea to talk to a financial adviser. They can help go over your finances and help you find the best option.
To use the snowball method, list your debts from smallest to largest. Start by paying off your lower debts, then slowly work up to the larger ones. For example, if you have a credit card with $1000 on it and a bill in collections worth $200, focus first on the collections bill.