We all want our debt consolidation program to be successful. But to make that possible, you need to follow a certain set of rules first. Unless you adhere to these guidelines, you will be more likely to make mistakes or be discouraged after a simple setback.
When you know the rules and you strictly abide by it, you can make decisions with more confidence. Even when something bad happens, you know how to act on it to resolve it.
According to reports, Millennials carry a lot of debt – an average of $36,000. While it may seem like a big amount, it is revealed that paying off debt is not their priority. Their biggest financial goal is saving money that will help them reach a milestone in their life – like marriage or owning their own home.
With all the debt that they owe, it is evident that they should do something to solve their financial issues. There are many ways you can get out of debt and one of them is a debt consolidation program.
5 debt consolidation rules to follow
If you plan on using this debt relief strategy to get out of debt, you need to follow these 5 rules.
Make it realistic
When we say realistic, this means you have to make sure that you can afford the monthly payments. To do this, you need to get to know your options and your own financial situation. Unfortunately, not everyone tries to understand what their options are. According to reports, most Americans are not aware of how beneficial balance transfer cards are. At least, this is true for those who will really benefit from it. When you plan on using debt consolidation, you need to know that there are many options for doing it. You should research the perfect option that suits your financial circumstances. The primary concern should be affordability. That will help you make your debt consolidation program realistic.
Create a new budget and stick to it
Once you have the type of debt consolidation that you will use, you need to create a budget that will compliment that. When you use a budget plan, you are more in control of your finances. This will allow you to make smarter choices about your money – including your debt relief options. While you are completing the debt consolidation program, you will go through a lot of difficulties. When you have your budget plan updated, you can easily track your expenses and make adjustments to avoid compromising your debt relief efforts. It will also help you track your spending so you will never have to run out of debt payment funds.
Set up milestones with appropriate rewards
Another rule that you should follow is setting up rewards. You need to set up milestones that will mark small victories on your road towards debt freedom. For instance, after you have paid a quarter of the debt, give yourself a small reward. Or you give yourself a reward after paying $1,000 worth of debt. These rewards are meant to motivate you to go through another set of payments until you reach the next milestone and reward. There is a higher chance of you completely paying off your debts.
Sometimes, you need to feel accountable for your debt payments to encourage yourself to pay it off. When you tell someone about your debt relief efforts, there is pressure to succeed. If you fail, someone will know about it. Feel free to tell your partner or the whole family about your endeavor to get out of debt. If your spouse knows that you are making an effort to fix the mess of your debts, that can even save your marriage – but only if you succeed in completely getting yourself out of your debt situation.
Keep in mind why you are doing this
Finally, you need to always keep in mind why you are doing this. Among the other rules, this is what will really sustain you. After consolidating debts, you still have a long way to go in your debt consolidation program. You still have to pay everything off. You want to make sure that you can complete all the payments so you can finally be free from the restrictions brought about by your credit obligations. If your reason to get out of debt is so you can buy your own house someday, print a visual representation of this. It is another way to motivate yourself to get out of debt.
Additional reminders while completing your debt payments
Apart from the 5 rules, there are other reminders that you need to consider when using a debt consolidation program.
Stop using debt
If you really want to get your finances in order, you have to stop using debt. Do not worry because this is only temporary. You still need to use debt every now and then if you want to keep your credit score up. But while you are still in the midst of a debt relief program, you have to keep yourself from borrowing more money. Otherwise, it will take you even longer to be completely debt free.
Track your progress
You should also track the progress of your debt relief program. There are many reasons why this rule is beneficial. First of all, it will help you monitor your payments. That way, you can easily check if you missed out on payments. Another benefit is you can see how much you have paid off and how long you have to go in terms of the repayment plan. For most people, knowing where they specifically stand in the debt relief program motivates them. If they focus on how much they have paid off, it can serve as an encouragement to keep going.
Increase payments when possible
Another rule that you may want to follow is increasing your payments whenever it is possible. This is one of the ways you can be smart when borrowing debt consolidation loan. The bigger the monthly payments, the faster you can get yourself out of debt.
Do not be discouraged by setbacks
Finally, it is important to keep yourself from feeling discouraged whenever you encounter setbacks during the program. This is not something that you can avoid. Life can throw unexpected events your way and it can compromise your debt payments. If there are unplanned expenses, do not let it stress you out. That is not enough reason for you to quit your debt consolidation program. You can always talk to the lender or creditor to allow you to pay a lower amount for a couple of months.