Make this year the year that you will be debt-free. It’s time that you take action on your finances and existing credit before you get trapped in the nasty cycle of debt. Here are some tips for you to get started:
1. Keep a list of your debts.
List down all your debts from all financial outlets and find out how much interest rate each of them is charging you. There are tools that can help you keep track of this faster and easier. For instance, if you know how to use Microsoft excel, you can use this tool to perform basic arithmetic and to keep your info as well.
2. Review your spending.
After listing down all your debts, the next step to take is to review your spending. Ask yourself if you’re getting the most out of your home and auto insurance. Also take a look at your utility bills as well as your broadband provider. By looking closely, you can decide if there are steps you can take to cut down the costs of these.
By trimming down on your spending, you will have the funds to pay off some of your debts earlier. In addition, some of your possessions may be too costly for you to maintain. If this is the case, then you might be better off without them.
3. What has been tempting you into more debt?
Regardless of how hard you remind yourself to prioritize your needs over your wants, this may be difficult to achieve if you have temptations around. What are these temptations? They could be your credit and store cards.
To avoid more debt, maybe you can cut up your credit and store cards. Maybe you can close some of your credit cards or request your provider(s) to reduce your limit. But, if you have the discipline, this should not be a problem. In fact, having a bigger credit limit is good as well, most especially when you know you have no one to turn to during emergency situations.
4. Know which debt to pay off first.
Ideally, the most expensive debt (in terms of interest rate and fees) should be paid off first. However, do not forget to pay at least the minimum payments for all your other debts in order to avoid additional fees. Your debts are reviewed and submitted to credit bureaus so they all affect your credit score. Failure to satisfy even the minimum requirements for even one may result in a bad credit rating.
5. Stay motivated.
Being debt-free this year takes a lot of willpower. There are 365 days and you need to keep yourself motivated every day so that you can reach that financial goal. Some tips to remain motivated will be to automate some of your debt payment, setting targets per month as well as rewards and trying not to stress yourself out on your debts.
Being debt-free is never quick and easy. It takes a lot of patience and determination. But as long as you learn to do the five steps mentioned above, this momentous task should be doable.