Managing Your Debt Worksheet
To understand your personal debt, complete the following activities:
List all of your credit cards and the interest rate they charge monthly if you do not pay them off in full.
- List any bank, car, or student loans you have and what interest rate they charge.
- List any other loans that you might have with family or other people or institutions and what interest rate they charge.
- List your fixed monthly expenses like rent, utilities, phone, etc
- List your insurance policies and their monthly charges.
- List your fixed telecommunications expenses like cell phone, wi-fi, cable or satellite TV.
The total of all the numbers above is your debt on a monthly basis. Some are fixed and some are variable. Your goal will be to reduce your debt in some way in order to qualify for a mortgage loan.
Whereas you can’t always change your fixed debts, you can evaluate your need for them or whether you use the items wisely.
Decide which items are actually needed and which items are luxury. For example, ask yourself if your cable TV is the cheapest and is the best way for your viewing pleasure or can its expense be reduced in some way?
Talk to the bank about reducing your car loans or student loans or any bank loans that you might have. Many times they have different loan policies that can reduce your monthly payments.
You can also go online and investigate different ways to reduce student and car loans and choose which way would benefit you most.
Evaluate your insurance policies to see if you are getting the best bang for your buck.
The variable expenses should be evaluated to help you reduce your credit spending.
Review your list of credit cards and choose the credit cards that have the highest interest rate to pay off first.
Your goal will be to get down to one or two credit cards. Therefore, first pay down or completely pay off the credit cards with the highest interest rates. Sometimes these are the store credit cards which lure you to them through promises of reduced merchandise. You can get the same reductions with that store’s coupons on your phone, computer or at the store itself without using that tempting credit card.
There are ways to bundle credit card debt into debt consolidation loans, but these are not always the cheapest ways or best ways to reduce credit card debt.
Once you get your credit card debt down to only one or two cards, monitor your purchases and evaluate which purchases were on a need basis versus a want or luxury basis. Try to purchase only need items. For example this may mean eating out fewer times or buying expensive coffee.
Reading material: “Getting Out of Debt” at https://www.practicalmoneyskills.com/learn/debt/getting_out_of_debt.