Following the pandemic, many families were left with debt. You might be in a strange financial situation as the economy has changed. Understanding how to handle your money and debts can be crucial for recovery. Learn what it means to live within your means and create a budget to help reduce your debt.
Where Do I Start?
Dealing with debt can be overwhelming, but with these tips and the help of the Armed Forces Benefits Network, you can understand where you are financially and where to go from here.
Before you begin building a budget for you and your family, understand your current financial obligations, like housing costs, car payments, and any other day-to-day expenses you might have. Also, look at your pay stubs and any other income you receive. With this information, you can determine the areas that are the most important and areas that might not be necessary.
Create a Plan
Building a budget can keep you within your means. Sticking to this plan is imperative to reducing debt and freeing up funds that could be applied to paying off outstanding payments. The goal is to outline your financial situation and to stop adding to your debt by minimizing spending.
Now you are ready to apply your leftover funds each month to overdue balances or an emergency fund to protect you and your family from unexpected expenses. If any of your bills have gone to collections, be sure to reach out to the company handling your debt and gather as much information as possible, including how much you’re currently owing, the original debtor, and the new terms for recovery. Apply any leftover funds to outstanding debt first before adding it to savings.
An emergency fund is a surplus of money to cover expenses in case you or a family member experiences a medical emergency, job loss, or accident. Begin building your emergency fund to cover your living expenses for three months, and then work for six months and then a year. Your emergency fund will be a cushion if you are in a strenuous situation.
Work Hard & Stay Positive
You have taken a significant and positive step in your financial well-being. Even though it can be discouraging when in debt, there are many precautions you can take to set yourself up for success. Educate yourself on your current situation and stick to your plan. If you are still unsure where to start or how to maintain your finances, many resources are available through AFBN to help you and your family navigate this stressful period. Set up a consultation or use our educational resources to learn more about budgeting and debt recovery.