Getting your debt under control is a step that will move your personal finances to a new level. Whether your goal is to manage debt, eliminate debt, or both, the resources and tools below can help.
Step 1: Take Inventory of the Debt in Your Life
What is debt? How did you get here? It’s not likely that you accrued your debts overnight. But today is a new day! Start taking control by completing a Personal Asset and Debt Inventory. This is simply making a list of your assets (the value of what you own) and a list of your debts (the value of what you owe). Common examples are provided in this guide on calculating your net worth. Evaluate your total debt as compared to your income by doing a simple calculation of your debt to income ratio.
Step 2: Devise a Debt Reduction Plan
Ready to make changes in the amount of debt in your life? Change is hard. Focus and discipline will get you there! Take the debt listed on your inventory and number them in the order which you’ll focus on paying them off. There are differing thoughts on what order to pay down debt. It’s your personal choice on what works best for you. But now you have a plan and that’s the best place to start! The video below shows the Debt Snowball method in action. The payoff concept applies to whichever way you’ve ordered your debts.
Step 3: Incur No New Debt
After all your hard work and sacrifice to get to this point, why would you go back into debt? May seem like an easy question, but the answer could be difficult. This step requires self-awareness and long-term commitment. Know your personal habits and tendencies. Some advisors recommend cutting up all your credit cards to guard against the risk of debt entering your life again. Some advisors recommend using the tools at your disposal in a responsible way to manage your money and live comfortably within your means. Each of us must weigh the advantages and disadvantages of credit cards*. Put into practice any new habits that will align with your personal financial goals.
Having trouble with debt collectors? Check out our Credit topic for more information.
Clergy looking for assistance in repaying their seminary debt can apply for funds from the Ministerial Relations Office.
Debt Consolidation* is a common consideration.
EY Financial Planners are available to clergy and lay participants of the Wespath pension plans. They provide free, confidential, unlimited advice on a wide variety of personal finance topics, including debt management.
*Resource: EY Financial Planning Center