Managing complicated debts: A practical guide for U.S. Hispanics

Talking about debt is not easy, especially when it has gotten out of control. But don't worry, because you're here to take the first step toward a solution. If you feel like your debts are snowballing and you don't know where to start, this article will guide you step-by-step to manage your complicated debts and regain control of your finances. Let's talk straight, like friends, because that's what it's all about: supporting you with practical advice and effective strategies.

How did we get here?

The first thing is to understand how you got into this situation. Debts can accumulate for multiple reasons: medical emergencies, unforeseen expenses, job loss, or simply financial mismanagement. Whatever the cause, now is not the time to blame, but to act.

Step 1: Recognize the problem

Step 1: Recognize the problem

In order to solve any financial problem, we

To solve any financial problem, you first need to have a clear picture. Make a list of all your debts, including:

• Credit card debts.
• Personal loans.
• Student loans.
• Medical debts.
• Overdue payments for basic services.

In each case, write down the total amount, interest rate, monthly payment and due date. This will give you a complete picture of your situation.

Practical example: If you have three credit cards with a total balance of $12,000, spread it out in a table for visualization. Use free tools like Google Sheets to organize this information.

Step 2: Define your priorities

Not all debt is the same. Some have higher interest rates and can accumulate faster if not paid on time. Prioritize your payments by following these strategies:

1. Snowball Method: Start by paying off the smallest debt while maintaining minimum payments on the others. This creates a sense of accomplishment that motivates you to continue.
2. Avalanche Method: Attack the debt with the highest interest rate first to save money on long-term interest.

Helpful Hint: If you have one credit card with a 25% interest rate and another with a 15%, prioritize the first one. This way you will reduce what you pay in interest.

Step 3: Create a realistic budget

A budget is your roadmap for getting out of debt. Divide your expenses into categories as:

• Essential expenses: rent, food, basic services.
• Debt payments: the amount you will spend each month.
• Savings: even if it's just a little, set aside something for emergencies.
• Non-essential expenses: leisure, impulse buying.

Practical example: Suppose you earn $3,000 per month. You can allocate $1,200 to essential expenses, $1,000 to pay debts and $100 to savings. This leaves $700 for other expenses.

Use applications such as Mint or YNAB to monitor your expenses and make sure you stay on budget.

Step 4: Negotiate with your creditors

Don't be afraid to contact your creditors. Many times they are willing to negotiate a more flexible payment plan, reduce the interest rate or even offer you a discount for early payment.

Practical advice: Prepare a simple script before calling. For example:

"Hi, I have an outstanding debt and I am working on a plan to pay it off, can you offer me options such as reducing my interest rate or extending the payment term?"

If negotiation does not work, consider seeking help from credit counseling agencies, such as those approved by the U.S. Department of Justice.

Step 5: Debt consolidation

If you have several debts with high interest rates, consolidation may be an option. This process consists of combining all of your debts into one loan with a lower interest rate. This simplifies your payments and, in some cases, reduces the total amount.

Practical example: If you have three cards with interest rates of 25%, 20% and 18%, consolidating them into one loan with a 10% interest rate could save you hundreds of dollars a month.

Step 6: Avoid new debts

It's tempting to keep using your credit card, but to get out of the vicious cycle of debt, you need to put a stop to it. Here are some strategies:

1. Use cash or debit cards: This helps you spend only what you have.
2. Set limits: If you need to use the card, set a monthly spending limit and stick to it.
3. Seeks additional income: From freelance work to selling items you no longer use, it all adds up.

Step 7: Learn from experience

Getting out of debt is not just a matter of paying, but of changing financial habits. Consider the following:

• Financial education: Learn about budgeting, saving and investing. You can find free online courses or attend local workshops.
• Create an emergency fund: A reserve equivalent to 3-6 months of essential expenses can protect you from future crises.
• Check your credit regularly: Use free tools like Credit Karma to monitor your credit score and correct errors.

Step 8: Celebrate your achievements

Every time you pay off a debt, take a moment to celebrate your progress. This doesn't mean spending money unnecessarily, but recognizing your effort. An outing to the park or a relaxing day at home can be inexpensive ways to reward yourself.

Conclusion:

Managing complicated debts may seem overwhelming at first, but with a clear plan, discipline and determination, it is possible to overcome any challenge. Remember that you are not alone in this process. Thousands of people have gotten out of similar situations and you can too.

Start today with the steps we've discussed and, little by little, you'll see how debt becomes less of a burden and more of a lesson in financial strength. You can do it!