Contributed by Credit Bureau (Singapore)
The decision to get yourself out of debt can change your wealth and your overall outlook on life for the better. It is important to understand that when it comes to repaying debt, there are a few tips and tricks that will make your bills more affordable and your payments more effective. But first you need to prepare your mind for what’s ahead, understanding at the beginning that you have to do a few basic things to set yourself up for success.
Getting out of debt involves more than just paying off a few credit cards. It means changing spending habits; learning how to budget; knowing who and how much you owe; prioritizing debts and most importantly, staying committed.
1. Make a Battle Plan
Start with looking at exactly how much you owe. Write down all of your expenses and income. Then determine how much money you can set aside each month to pay off debt. Next, take stock of your credit cards, including the interest rates and minimum payments. Focus on paying down the debt that has the highest interest rate and make paying it off a priority.
Order your debts from highest interest rate to the lowest interest rate
Use any extra cash you have available to pay off more of your debt with the highest interest rate
Following the logic above, if you have a $2,000 credit card bill with a 24 percent interest rate, you should tackle that before your $8,000 student loan with a 7 percent interest rate. This strategy minimizes the amount of interest you're paying overall, which can save you thousands over time, depending on the level of debt you have.
2. Keep track of your debt with My Credit Monitor (MCM)
My Credit Monitor acts as your third eye to monitor your credit report, looks out for predetermined activities and notifies through your email as soon as the lender uploads your information into your credit file thus providing the earliest possible indicator.
This service is intended to allow you to receive SMS notifications whenever there is a change to your personal credit report such as a deteriorating status change assigned to any of your credit facilities (eg. From A to B status). You will receive an early notification if you have learnt that you have been missing payments and failing to repay your debt. Your repayment status will improve with each payment you make towards your debt.
3. Share your plan so you remain accountable
Having an accountability partner who checks up on your progress or partnering with someone who's also working to get out of debt will also help motivate you to stick to your debt plan. It could be a friend, co-worker, spouse, or family member. You can bounce ideas off each other or support each other when you feel discouraged.
If you truly want to be debt-free, do not focus too hard on the numbers. Ask yourself what will inspire you to keep going, no matter what. Sometimes, motivation is more than important than the doing the math.