Are you ready to make a plan to pay off debt? Use these tips to help start your new year with good habits to help you reach your goals.
Carrying debt isn’t only expensive, it can be a barrier when it comes to doing things you want to do. If you’re ready to leave it behind, now’s the perfect time to do so. Go forth, make a plan, stay focused, and be persistent.
Tackling debt starts with knowing what all there is to tackle. Begin by making a list of all your debts; make note of the minimum payment, interest rate, and balance for each. This will help you better assess your situation and help you decide on a debt-reduction strategy.
To ensure no debt is forgotten, consider visiting annualcreditreport.com to obtain a free copy of your credit report.
Take It Easy
If you’re working hard to reduce and eliminate debt, acquiring additional debt would obviously be a step in the wrong direction. If you can, try to avoid accumulating more debt by any means. Adjust expenses elsewhere or try to save up for expenditures you know are coming.
Getting out of debt should be something you’re fully committed to doing. If you’re simply applying whatever funds are left to your debt, you’re likely doing only a fraction of what you can do. Seek to put more towards your efforts by freeing up money that’s tied up or finding ways to earn more.
- Cancel or seek discounts on memberships, policies, and other paid services
- Sell personal items to gain some extra cash
- Turn hobbies into income or get a small side job
- Try less expensive activities like date night at home, fun at the park, museums, etc.
Choose An Approach
One common debt-reduction strategy is the stack method. With this approach, you make the minimum payment on all debts while putting extra funds toward the debt with the highest interest rate. Once one balance is paid off, you apply that payment to the second most expensive debt and repeat. Paying down debt by interest rate ultimately helps you avoid additional interest. In general, credit card debt will be a good place to start.
If making payments on your loans is becoming increasingly difficult, it may be time to consider consolidation. This allows you to combine existing loans into one at more favorable terms as the interest rate and payment amount are usually lower.
Mediums include personal loans, home equity financing, and balance transfers to zero-interest credit cards. Before making a decision though carefully compare your options and determine the costs associated with each.
Set Yourself Up For Success
Stay on top of your finances and repayment plan by building a budget that aligns with your goals. Determine what each month looks like in regards to income and expenses and analyze your transactions. Use previous bank and credit card statements to find areas in which you can further reduce expense, adjust, and make a plan for your money moving forward.
- Live within your means and try to avoid additional debt
- Make the most of every dollar by comparison shopping, finding discounts, etc.
- Make your payments on time and keep balances low
- Celebrate your achievements but don’t overdo it
Last, but certainly not least, is the emergency fund. We know unforeseen expenses come up all the time, so why not save for a rainy day? Start small and increase your contribution as you see fit. Setting some money aside today could mean avoiding high-interest debt in the future.