On your list of things to declutter and organize, your finances are probably hiding near the very bottom of your list of to-dos, but organizing debt reduces stress. Managing debt can be very stressful, but like anything else, the path to easing that stress is better organization.
Make a list.
No great plan happens without a list, so you shouldn’t be surprised to see this handy organizational tool here. Before you can begin organizing debt, you need to know what you’re dealing with. List all your credit cards, the total balance owed, the interest rate, and what you owe each month for each. It can be tough to look at everything laid out in front of you, but it’s the only way to take control of the situation.
Determine your priorities.
What debt is weighing most heavily on your mind? If there’s something that means a lot to you, like paying off a department store credit card to cut the habit of unnecessary spending, move this to the top of your list. To more effectively pay off debt, you can prioritize your credit cards by the amount you owe (lowest or highest) or the interest rate.
- You can pay off the card with the lowest balance first, then take that monthly amount and add it to the next card.
- Tackle the card with the highest interest rate first, since you may be throwing money away just barely keeping up with the interest each month
- You can pay off the lowest balance cards but take everything you save from those monthly payments and put it toward the card with the highest interest rate
Create a budget.
To begin organizing debt, you need to have a clear understanding of your whole budget. Write up your monthly expenses. See what you could change (like packing a lunch instead of purchasing one or taking coffee from home instead of the daily Dunkin’ drive-thru). Put some money towards getting rid of debt. By creating a budget you’ll see where you have extra money to pay toward credit card balances.
Tackling your debt is easier when you’re organized. You can’t change the choices that put you into debt, but you can turn it around. Focus your energies on spending differently and prioritizing a payoff plan.