About half of Americans are concerned about their debt

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Are you worried about your debt? Here’s how you can manage it more effectively.

It’s no fun owing money and having a portion of every paycheque tied up in paying down debt. In fact, for many people it is a major source of stress. As a recent poll by A capital letter revealed, about 45% of Americans worry about their debt load. And many report that these worries make it harder to manage their money.

If you are one of the millions of Americans concerned about your debt, you can alleviate some of your fears and improve your overall financial situation by making a plan. These four steps can form the basis of your plan and help you manage your debt proactively.

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1. Take stock of your situation

Some debts are more of a concern than others. Of particular concern are consumer debts that typically have very high interest rates, such as payday loans and credit cards. The high interest rate means not only that the debt is more difficult to repay, but also that the total cost of repayment is much higher.

However, other debts are not necessarily a major concern as long as you can afford your payments. Mortgage debt and student loan debt, for example, generally have low interest rates, and interest charges may be deductible depending on your tax situation.

These debts are designed to be repaid over a long period of time, and it usually doesn’t make sense to pay them off sooner, as you could often get a better return on your money by investing.

If you are stressed out about your debts, sit down and figure out which debts it makes sense to try and pay them off as soon as possible. Then figure out how much you owe them.

2. Look for ways to lower your interest rate.

If you have a lot of high-interest debt, you don’t necessarily stay there until it’s paid off. You may be able to refinance it to lower the rate you are paying. You could potentially do this by using a balance transfer credit card and transferring your existing credit card debt to it. This could reduce your rate to 0% for a limited time.

You might also consider qualifying for a low-interest personal loan and using the proceeds to pay off more expensive debt.

If you lower the rate you’re charged, it will cost you less to get out of debt, and hopefully you won’t worry as much about how to handle paying off what you owe.

3. Develop a repayment plan

Having a debt repayment plan can help you both ease your financial stress and get you debt free faster. When you have a plan, you’ll know exactly what you need to do and can track your progress to make sure you’re on the right track.

For many people, the debt snowball plan makes sense. This means that you must first pay off your lower debt balance by making additional payments, and then consolidate all the payments you made into one larger debt payment with the next lower balance. You can continue to do this until all the debts you want to pay off have been paid.

If you have high interest debt with a high balance, you will be paying a lot more in the long run using the snowball method. Instead, you can go for the debt avalanche method, which would mean paying off the debt with the highest interest rate first, then deferring the payment to the debt with the second highest rate, and so immediately until all debts are paid off.

Whichever approach you choose, be sure to stick to it and prioritize additional debt payments in your budget so you can see the progress.

4. Take steps to avoid falling back into debt in the future

Once you’ve worked hard to get rid of your debt, you don’t want to go back to it and be stressed about your finances again. To avoid this, work on building an emergency fund with several months of living expenses. If you can count on this fund when unexpected costs arise, you shouldn’t have to borrow in the future.

You shouldn’t have to spend your life worrying about your debt

If you are one of the 45% of Americans who worry about your debt, you know the consequences it can have. You deserve to live your life without this burden, so follow these steps to reduce your stress and get on your way to debt relief. Once you have your plan in place and working towards your goal, you should feel much better about your situation.

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