Six Tips to Help You Get Out of Debt
Debt is a common problem. Millions of Americans have this dark cloud hovering over their heads, charging them interest fees, and making life more stressful. In fact, the total U.S. consumer debt is at $13.86 trillion when you factor in mortgages, car loans, and student debt. Deciding to get out of debt is the first step on a long road. Some might think it’s impossible, but it’s not. If you work hard, and save smart, you can get out from under the crushing weight. Below, you’ll find six tips to help you along the way.
Change Your Habits
If you want to see change in your life, you have to change what you do on a day-to-day basis. You can’t get out of debt if you constantly make the same choices that got you into debt over and over again. Too often, people get excited about getting out of debt, promise themselves that they’ll make better financial decisions, and then go get coffee from Starbucks the next morning. If you’re serious about becoming debt free, reckless and unnecessary spending can no longer be part of your daily routine. Instead of spending five dollars on coffee, brew a pot at home. Swap Starbucks for coffee pot coffee enough and your savings will start to rack up.
Create a Budget and Cut Spending
Creating a budget is a smart financial decision for anyone, but it’s especially important for someone looking to free themselves from debt. You should know exactly how much you have to spend each month and where every dollar is going. Creating a budget prompts you to cut back on unnecessary spending. Perhaps you’ll realize you don’t need a Netflix, Hulu, and a cable subscription. By eliminating unnecessary bills, you’ll add more money to saving’s accounts and debt payments each month. Accounting for every dollar spent will also discourage spontaneous spending online, at the grocery store, or on clothes.
Focus on One Debt at a Time
When you have several credit cards with charges racked up on each, it might seem like a good idea to pay large sums to each card. It’s not. Spreading out payments is a common mistake, but it’s one that will make your journey longer and more stressful. You’ll need to make the minimum payment for each card, but all your extra money should be spent paying down one card at a time. Choose the card with the smallest debt, and pay as much towards it each month as you can. Once you get that card paid off, you can increase the amount you pay to other cards and start working on the next lowest until you’re debt free.
Do a Balance Transfer
If you’re drowning in interest charges, consider doing a balance transfer to shift your debt from your current card to a new one. Several cards offer zero percent interest on balance transfers for a duration of 12-15 months. By eliminating interest payments, you’ll be able to pay down your debt faster. Keep in mind that interest charges will begin after that 12-15 month period, and there is normally a 3% fee when you make the initial transfer.
Don’t Close The Accounts That You Pay Off
Another common mistake people make when trying to become debt free is closing accounts once they’re paid off. If you pay off a card, congratulate yourself and move on. Don’t close the account. The reason you shouldn’t close the account is that your credit score is determined using a number of different credit factors. One of the most important factors that contributes to a high credit score is a large credit allowance with low credit spending. Having credit but not using it proves that you have self control and reflects well on your credit score. If you feel tempted to use the card once it’s paid off, hide it away and don’t take it with you when you leave the house.
Don’t Be Afraid to Ask For Help
You don’t have to get out of debt alone. There are several companies designed to help assist you in various ways. If you don’t feel like you can become debt free without professional guidance, reach out for help. Do your research first to ensure you choose the option that is best for your personal situation.
Becoming debt free is a challenge. The road is long and you’ll have to make sacrifices. But if you’re willing to cut back now to provide yourself a better future, financial freedom is within reach.
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