to put you in a better financial position to purchase a needed vehicle or invest in a home purchase. To establish a plan for paying off debt, you should make a list of what you owe, form a payment strategy, and start building savings.
Make a List
List out all your known monthly costs into three categories: loans and credit cards, living expenses, and other monthly expenses. This will allow you to form the best possible strategy for paying down your debt, and it will create valuable insight to where your money is going each month. Be thorough to ensure you have a complete picture of your financial situation and can appropriately allocate funds to all of your living essentials. If you are using your INTRUST Bank checking account or debit card to pay bills, you can find expense information quickly by reviewing your account activity in online and mobile banking or by evaluating last month's statement.
Loans and Credit Cards
Begin by writing down all of your loans and credit card balances. Next, organize them from the least to greatest amount. Be sure to make note of the monthly minimum payment amount next to each one, so that you are accounting for what needs to be paid to not fall behind.
Create a separate section for required monthly expenses, such as groceries, gas for your vehicle, car insurance, rent, utilities, phone bill, childcare, and any other monthly expenses that are a necessity for your household.
Other Monthly Expenses
Next, create a section for monthly expenses that are not necessities. This category should include any monthly subscriptions, such as cable or movie streaming services, retail subscription services, magazine subscriptions, and any memberships, such as gyms, recreational clubs, organizations, and local attractions.
Form a Payment Strategy
Total up your list to form your estimated monthly expenses. Before you can begin the process of paying off your debt, you need to subtract this estimate of monthly expenses from your monthly take-home pay. The amount remaining is what you have to work with in paying off debt from your income.
Your next step is to refer back to your list of loans and credit cards and identify the best place to start. If you are able to use extra cash, such as from your tax refund or stimulus payment, you can knock out the small debt right away. Once you have paid off the first debt on your list, take that same payment amount and combine it with the minimum payment of the next debt on your list. This payment strategy helps you pay off debt faster because you are always increasing your payment amounts and focusing on small victories in your debt repayment plan. You will knock down the balances more quickly and efficiently than just applying the minimum payment each month.
While you are in the process of paying down debt, it is important to continue building your savings as well. For your strategy to pay off, you don’t want to accumulate more debt along the way. If you already have a payment strategy in place, your tax refund or stimulus payment could serve as your savings starter or booster. Having that cushion in savings will help you stay the course on your debt repayment plan, avoid tapping into credit cards to make ends meet, and allow you to build for the future.If you need to establish a savings account to help achieve your goals, you can open an INTRUST Bank Savings Account online in a few minutes, and you can even set up recurring transfers from your checking account to make saving an automatic part of your strategy. Whether you plan on paying down debt or cushioning your savings, taking advantage of extra cash on hand will help you better your financial well-being. For further guidance to help you start saving, see our Good Time to Save article.