‘Where is all my money going?’

Have you ever had one of those months where you get paid, but you don’t know where all your money went?

Most Americans are in debt due to soaring college costs, credit card debt and the need to keep up with the Joneses. I recently heard of people purchasing a family pet on a payment plan.

Talking about debt can be a difficult conversation most people try to avoid, but you need to have a good idea of how much debt you have so you can create a strategy to manage it. Getting out of debt should be your focus if your debt is spiraling out of control. Calculate your debt and pay attention to the interest you are paying while making minimum payment.

Why is a financial professional talking about debt? A financial professional can create a strategy to help you reduce your debt and achieve your financial goal.

Think about making a budget, list all your sources of income and all your monthly bills to determine your disposable income. If you have a negative number, think about where you can cut costs. If you need help creating your budget, talk to a financial professional or coach, you also can research “creating a personal budget” on the Internet, which can provide valuable information at no cost. After creating your budget, it’s time to put a plan in place.

Here are a couple of options:

Debt snowball. In this strategy, you make a list of all of your debts and start paying as much as you can afford, even if it’s just $5 or $10, on the smallest balance debt. When your smallest balance is paid off, you add that amount to the next balance until you’ve paid off your largest debt.

Debt avalanche. Here, you list debts in descending order by interest payment. Similar to the previous method, you pay extra when possible on the first debt, when that debt is eliminated you roll that entire payment into the next debt.

Not sure where to start? Contact a financial professional or coach, consider talking to someone about a debt consolidation plan.

Claire Damgaard in an agent with New York Life Insurance in Dubuque.

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