We all need to manage credit properly if we are to survive the current crisis. If you are not aware, our economy is going into recession. And it’s not just us. The whole world is going into recession. And we can all blame it on the current pandemic. Not only has it given us a health crisis, but it also pushed us into this economic crisis.
And all of this is worrying the average American. In fact, one survey mentioned that 2 out of 3 respondents expressed their concern about their personal finances. To be specific, they worry about their job security, the state of the economy, and their debts.
If you want to survive the current crisis without losing everything you worked hard to achieve, you need to learn how to manage credit properly. Fortunately for you, it doesn’t take a rocket scientist to do this. What you need to do – these are all quite simple. But you need to be determined enough to fully implement them.
The truth is, getting out of debt is hard because it usually happens over a long time. A lot of things can happen since you started your debt relief journey. And some of these changes can affect your ability to pay off your debts.
So besides knowing how to pay off your debts, you should also be determined enough to stick to the plan of getting out of debt. That way, nothing will keep you from completing your plans to pay off debt.
How to manage credit properly despite the crisis
Before you can pay off debt, you need to learn how to manage credit properly. Even if you have no plans to use debt again (which is very unlikely to happen), you still have to manage your existing debts. And with the mounting debt of the average American, this is a skill that we all need to have.
But how can you manage your credit? Well, the things you can do will depend on the type of debt that you have.
So let’s go through the two debts that are rising because of the current health and economic crisis.
Credit card debts
According to reports, the COVID-19 pandemic has pushed almost ¼ of cardholders further into debt. And some of these people can barely pay more than the minimum payment requirement. With the high-interest rate of credit card debts, it will take a very long time for consumers to completely pay off their debts. So what can you do to manage your credit card debt properly?
You can enroll in a hardship program. The truth is, credit card companies always have cases like yours. There is always that one credit card owner that is struggling to pay off debt. So they have a program in place for that. They will not publicly offer it to you. Because obviously, they still want you to pay the full amount that you owe in the fastest way possible. This is why you need to do your research.
Get to know the credit card hardship program of the creditor. It is just a new payment plan that will make monthly payments easier on your budget. The details will depend on what you will negotiate with them. Sometimes, they will allow you to pay only the interest. Or they will allow you to stop paying for a predetermined period. Make sure you fully understand what they offer. And be honest with what you can afford.
Our expensive health care system has always been a huge burden for patients and their loved ones. It is not surprising that a lot of people find themselves with a huge amount of medical debt. Since we are currently in the midst of a pandemic, it is not impossible for you to accumulate more medical bills. So what can you do about these? Like your credit card debts, you need to pay these off. But how can you manage credit properly when you are in the middle of a crisis?
The best way to deal with your medical bills is to negotiate it. Talk to your healthcare service provider and ask them for a more affordable repayment plan. Make sure that you understand the rules to follow during credit negotiation. That means you need to be prepared before you start negotiating. The more you know about the process and your rights, the better position you will be to negotiate a favorable deal. Just make sure that you will be firm with what you can afford. Don’t agree to something that you cannot commit to.
2 keys to managing credit properly
If you can manage credit properly, specifically the two debts that were just discussed, it should be easier for you to survive the crisis.
Why? Because your debt has the ability to make things worse. While you are in a crisis, you need to be extra careful with how you handle your finances. Things are already tight as it is. If you make a wrong move, it can make things worse. And the presence of your debt will make your financial situation even more fragile.
This is why you need to make sure that your debt is under control. Fortunately, it doesn’t take a rocket scientist to do this. In fact, managing credit will only require 2 things.
Change your budget plan
If you really want to manage credit properly, you need to start with your budget plan. And if you already have a budget plan and yet you still cannot control your debts, that means you need to change it. Even if your budget plan worked when you created it, a lot of things can change over time. What used to work back then may no longer be applicable now. For instance, you used to be able to pay off all your debts without any issues. But due to current events, you now have to deal with creditors because you can pay them all.
This is something that can happen to anyone. So if you find yourself unable to control your debts, the first thing you need to look at is your budget plan. Make sure it’s aligned with your current financial situation. If you have a lower income, make sure your new budget reflects that. Then adjust all your expenses to make sure it fits your reduced income. This will keep you from overspending and adding more into your debt.
But that’s not all. If you include your debt payments in your budget plan, you can also make sure that it is always funded. If your income falls short, this budget will show you the list of expenses that you have. You can choose which expenses you can remove so you can live within your budget.
Increase your debt payments
The second thing that will help you manage credit properly is to increase your debt payments. With the help of your revised budget plan, this should not be hard to do.
One of your first options is to reduce your expenses. Live a frugal life so all your expenses will be focused on what’s important and necessary for you to survive. Using a bare-basic budget at this point is a good idea. Don’t worry about the restrictions. This will only be temporary. As soon as you have more control over your debts, you can loosen it a bit. But for now, make the necessary sacrifices so you can manage credit properly.
Apart from cutting back on your expenses, you should also consider earning more. Find a side gig that you can do to supplement your income so you can increase your debt payments. While cutting back on expenses can help, it will not be enough. It has a limit.
But if you earn more, the extent of the increase in debt payments will be greater. There’s no limit. If you want to earn more, you can simply keep on working.
Earning more will also secure your finances. Having more than one source of income will ensure that even if you lose your primary source of income, you will not be completely left without cash flow.