4 Tips for Getting Out of Debt

woman with bills and calculator

Many people face a financial crisis at some point in their lives. If you’re having trouble paying your bills and are worried about losing your home or car, know that you’re not alone. Read on to find out 4 tips for getting yourself out of debt.

1. Make a Budget

A couple working on a budget together.The first step to getting yourself out of debt is to make a budget. You need a plan for how you’ll spend your money each month. The budget will help you see how you spend your money now and how you might be able to spend your money differently. To make a budget, gather all of your bills and pay stubs, look at receipts to see what you typically spend money on (groceries, entertainment, transportation, clothing, etc.). Then, you’ll add up all of your paychecks and other income and subtract your expenses from that.

Once you lay out your plan, look for things in your budget that you can change so that you have more money leftover each month. Your goal is to stop adding to your debt, and also pay down the debt you already have, if you can.

2. Talk to a Credit Counselor

couple talking to a credit counselorAnother tip to consider is talking to a credit counselor. A reputable credit counseling agency can give you advice on managing your money and debts, help you create a budget, provide free educational materials and workshops, and help you make a plan to repay your debt. Credit counselors discuss your financial situation with you, then come up with a personalized plan to help solve your debt issue. Keep in mind that most credit counseling agencies are nonprofits with low fees and offer services through local offices, online, or over the phone. You’ll want to look for a credit counselor you can meet with in person.

3. Come up with a Debt Management Plan

debt management plan on tableYour credit counselor might suggest that you enroll in a debt management plan. Debt management plans are for “unsecured” debts like credit card or medical debts. They aren’t for “secured” debts like houses and cars. In a debt management plan, your credit counselor will see if you and the companies involved can agree on a plan to repay the money you owe them. Once you work out a plan, you’ll deposit money into an account held by the credit counseling agency each month. The credit counselor then uses that money to pay your bills. A successful debt management plan requires you to make payments on time, on a regular basis. It can take 48 months or more to complete.

We offer a useful calculator for managing debt that can be used as a good starting point for your debt management plan. You’ll enter all of your credit cards and outstanding installment loan balances, then find out how much you owe and how long it will take you to pay it all off.

4. Consider Debt Consolidation

A woman budgeting with her calculator.Another way people can lower their monthly payments on their debt is to consolidate it through a second mortgage or a home equity line of credit, or by taking out a personal debt consolidation loan from a bank or finance company. If you’re wondering whether or not you should consolidate your debt, use our debt consolidation calculator. Our calculator will have you enter your credit cards, auto loans, and other installment loan balances. You can then change the consolidated loan amount, term, or rate to create a loan that will work well within your budget.

About Tennessee State Bank

Tennessee State Bank has been serving our local community for over 48 years. With branches in Sevier County, Knox County, Cocke County, and Jefferson County, we offer convenient banking services in East Tennessee. Whether you’re looking to open a checking account, obtain an auto loan, or apply for a home mortgage, we make the process as simple and straightforward as possible. Tennessee State Bank’s motto is “Banking at its Best!”SM, and we strive to live up to that creed every day. Let us know how we can help you by sending us a message via our Contact Form.

Tennessee State Bank is Member FDIC and an Equal Housing Lender.
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References

“Getting Out of Debt.” Federal Trade Commission, https://www.consumer.ftc.gov/articles/getting-out-debt.