Managing your debt

Shot of a young man using a digital tablet while having breakfast at home

Take control of your debt before it controls you

Most people take on some level of personal debt, whether through a mortgage, student loans or credit cards. But if you’re not careful, acquiring too much personal debt can come back to haunt you. 

 

The key is to control your debt before it controls you. The sooner you get your debt under control, the more confident you will feel about your financial future

Know the difference between good debt and bad debt

It’s ok to take on a realistic and reasonable amount of good debt, such as a mortgage, or student loan. Bad debt, however, can snowball quickly. Credit card debt, payday loans and even car loans can be considered bad debt

Create a budget that doesn’t include new bad debt

A great way to avoid bad debt is by developing (and sticking to) a household budget. Start by tracking your expenses for a month. This will give you a better idea of where your money is going.

Add up your debt

Take an inventory of everything you owe. Determine how much you can afford to put toward paying down your debt each month. For each debt you owe, write down the current balance due and the interest rate.

Set your debt payoff schedule

There are several methods that you can use to pay off debt. The “Momentum Method” often proves most effective. While still making minimum payments on your other debts, pay off the account with the lowest balance first, which gives you a sense of accomplishment in erasing a debt. Once you have paid off an account, roll that payment amount into paying more on the next account with the next-lowest balance.

A word about savings and debt management

Regardless of the amount of your debt, it is important to put money toward both your debt reduction and retirement savings. Putting off savings until you are debt-free can prevent you from using one of your greatest assets: time. Pay yourself first by setting up your retirement account contributions and then work to pay down that debt.

OneAmerica Financial is the marketing name for the companies of OneAmerica Financial. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice.

 

NOT A DEPOSIT • NOT FDIC OR NCUA INSURED • NOT BANK OR CREDIT UNION GUARANTEED • • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • MAY LOSE VALUE