Whether you lost your job, recently got divorced, or had a medical emergency, it’s surprisingly easy to fall into debt. Fortunately, you can improve your financial health by taking the necessary steps to manage the situation, including reducing your expenses and filing for bankruptcy if necessary. Here’s what you need to know.

How to Manage Debt Effectively  

1. Assess Your Debt

Start by determining what type of debt you need to deal with. Is your issue due to a large credit card bills, medical expenses, or late mortgage payments? Next, calculate your debt-to-income ratio by dividing your monthly debt by your monthly income. If your ratio is above 40%, you could run into issues making your monthly payments. Finally, consider whether your debt is preventing you from paying your regular bills, such as electricity. If it is, work with a bankruptcy lawyer to get relief.

2. Create a Budget

Without a budget, it’s almost impossible to keep track of and manage your finances. To create one, write down your monthly income, including money you make from part-time and full-time jobs. Next, add up your fixed expenses, such as your mortgage and insurance costs. Also, include an estimate of your variable costs, such as the electricity and gas bills. Finally, determine if you’re spending more than you’re making. If you are, find ways to cut back, such as getting rid of a gym membership or eating out less often. 

3. Use Extra Money to Pay Off Your Debts

Once you’ve determined your income and expenses, allocate the remaining money toward any debts. Focus on the areas where you’re paying the highest interest rates first. For example, credit card companies can charge 20% rates. This method will allow you to pay the least amount of money over time while reducing the time it takes to improve your financial health. If you’re struggling to come up with extra cash, sell items online or freelance during your spare time. 

When you need help managing and reducing your debt, contact Lein Law Offices. Serving Sawyer County, WI, their bankruptcy attorneys have been providing legal counsel since 1983. They will help you improve your financial health and find debt relief options if needed. With experience assisting clients with the filing process for Chapter 7 and Chapter 13, they will ensure that you get a fresh start. Call (715) 634-4273 to speak to a lawyer in Heyward or Winter, or visit the website to learn more.