Dealing With Debt: Tips to Manage Your High Debt Level

Having debt can be stressful. The longer it lasts, the more it costs due to interest rates that tack on fees every month the balance gets carried over. But paying it all down at once often isn’t possible for many people.

A simple rule of thumb is debt should be no more than 36 percent of your gross income, according to Money Crashers. The fact is, it’s OK to have some debt, as long as you’re paying it off responsibly. So, what can you do to manage it all?

Know the Signs

Beyond the 36 percent rule, there are some side effects of having too much debt that you should be aware of. For instance, if you feel that you can only make the minimum payment on your monthly bills, you may be in over your head.

Another bad habit some people in debt fall into is overpaying their bills, but then not having enough money to carry them through to the next paycheck. This may result in buying groceries, gas or other essentials with a credit card that already has a high balance. Or, if you find yourself constantly stressed about your debt level to the point where you are losing sleep or have high anxiety, you may need to rethink your spending plan.

Luckily, there are some things you can do to take control over your financial situation. Living in debt isn’t fun, and when it gets to be too much, it can be unhealthy. The important thing is recognizing the issue and taking action.

One Debt at a Time

To begin to responsibly shed your debt, you’ll first need to determine how much debt you actually have. Make a list of all of your debts, including things like credit cards, auto loans, mortgages and student loans. Next to each item, write how much you owe, the interest rate and the minimum monthly payment.

Next, you’ll determine how you want to pay each of them off. The Simple Dollar suggests the snowball method. This means you’ll focus on one debt at a time, rather than paying each of them off incrementally and equally.

Decide whether you want to focus on your smallest debt or the one with the higher interest rate. If you choose the smaller one, you’ll likely pay it off quicker and feel accomplished and excited to move onto the next one. If you choose the one with the higher interest rate, it may take longer, but you’ll save money in interest in the long run.

Once you choose which debt you’ll pay off first, you’ll pay as much as you can afford toward that one debt. For the others, you’ll only make the minimum payments. Once the first debt is completely paid off, you’ll allocate your debt-paying budget toward your next debt, continuing to pay only the minimum on the remaining ones. You’ll continue like this until all of your debts are paid off.

Lower Your Rates

If your interest rates are slowing your progress, you can look into getting a lower one. explained that some people may qualify for lower rates if they ask. Check your credit score to see where it’s at. The higher it is, the more likely you’ll be able to lower your rates.

Another way to lower your rates is through a consolidation loan. With this, you’ll take out a loan to pay off your debts. Then, you’ll pay off the loan. This is beneficial because it reduces the number of debts you have and can offer you a lower interest rate, saving you money over time.