Drowned in debt? Here is the first step to follow

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It’s easy to feel overwhelmed by debt. Unpaid student loans, an ever-growing credit card balance with high interest, a monthly car payment: these are some of the reasons young consumers feel like they have a huge financial burden on their shoulders.

In fact, a survey by Select and Dynata found that almost half (44%) of 18-34 year olds feel “drowned in debt”. Although it can sometimes seem difficult to see the light at the end of the tunnel, the best thing for these indebted adults is to simply Somethingargue Kristen Ricuperofinancial coach and consultant at Financial Fitness Coaching.

“It doesn’t have to be big to be effective,” says Ricupero. “Money is more emotionally and behaviorally charged than numbers.”

His view is that your debt repayment journey can start with small gains, like applying a little savings you have on your credit card balance or cutting costs to find money. extra money. It can motivate you to take the next small step, and so on, until your debt is a thing of the past.

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Your first step: do something, even if it’s small

A lot of people feel like they can’t move on and achieve their life goals because they have too much debt. But keep in mind that any small step in the right direction can help get you on the right track.

“Too often the problem of feeling overwhelmed by debt is not because we don’t make enough money to eliminate it, but because we don’t know where to start or where our money goes” , explains Ricupero.

If you feel like you’re drowning in debt, she encourages you to start by simply looking at your bank account to better understand your past spending. This can help you see your shopping habits and reveal categories where you could cut spending. One of the goals is to find excess money that can be used to pay off your debt.

Then choose a debt to repay

Most people who feel overwhelmed with debt have balances in multiple accounts, whether they have more than one credit card, a student loan, or a large car loan. Sometimes it can be difficult to prioritize what to pay first.

You must do at least the minimum payments on all your other debts to keep your accounts current and your credit score stable. After that, determine the best debt repayment plan for you.

You can choose to pay off your smallest balance first (snowball method) or focus on the debt with the highest interest rate (avalanche method).

Once you’ve figured out how much extra money you need to spend on your debt, Ricupero recommends putting it on just one balance. Spreading that extra cash to pay off multiple balances at once is one of the “biggest mistakes” she says keeps people in debt longer.

“The impact on principal is greatest when you put everything on one debt,” says Ricupero. “You will progress faster, which will make you want to continue on the path as you focus on one at a time.”

If You Have Credit Card Debt, Consider This Third Step

If you wear a revolving balance on a credit card, you might want to focus on that first, given the notoriously high interest rates on credit cards. “Interest can quickly add up and increase each month,” says Leslie Tayne, debt relief lawyer at Tayne Legal Group.

Consider signing up for a balance transfer credit card. When you do a balance transfer, you transfer debt from one credit card to a new card that offers a low or 0% introductory interest rate period, which typically lasts six to 21 months. During this period, you will not have to pay any additional interest charges and you will be able to benefit from your payments entirely allocated to your principal balance.

The Citi® Diamond Preferred® Card has a long introductory APR of 0% on balance transfers for 21 months from the date of the first transfer, almost two years (after, 14.49% – 24.49% variable APR). Keep in mind that all transfers must be completed within the first four months. from account opening, and there is a balance transfer fee of $5 or 5% of the transfer amount, whichever is greater.

The Citi® Dual Charge Card offers no interest for the first 18 months on balance transfers (after, 14.74% – 24.74% variable APR; balance transfers must be completed within four months of account opening. ) An introductory balance transfer fee of 3% ($5 minimum) applies for each transfer made within the first 4 months; after that, a balance transfer fee of 5% of each transfer ($5 minimum) applies. The Citi Double Cash Card also has a cash back program where cardholders earn 2% cash back: 1% on all qualifying purchases and an additional 1% after paying their credit card bill (you do not earn rewards on transferred balances).

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Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

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