Lowering Your Personal Debt
Feeling bogged down by debt? You’re not alone! Debt is a common problem, but one that you truly own and tackle. Just think how much more freely you can pursue your dreams after you’ve paid all of them off!
Here’s some good-to-knows to help you get started down the road to financial freedom:
Understand what you owe. Look at mortgages, auto loans, credit cards, past due balances on bills, and any other outstanding debt. In many cases, you can contact your lenders to try and work out a lower payment plan or interest rate.
Track spending. Making a journal for your finances is a great way to see how much you’re consuming. Little daily purchases and seemingly insignificant impulse buys can stand out as obvious places to reduce spending.
Make budgets to plan expenditures. Creating a budget is how you keep your financial dreams in clear focus. With this step-by-step outline, you can plan the stepping stones to reaching your goals.
Avoid credit. Avoid interest. If you don’t pay your balance each month, you’re paying interest. Asking yourself if a purchase is worth taking a loan for, and paying more for, will help you identify unnecessary spending.
Pay high-interest debt first. Paying the most you can to the highest interest loans you have — and the minimum to the lowest — removes your most expensive debts. Once high-interest debt is paid off, tackle the next highest, and so on.
Refinance and transfer. The object is to pay as little interest as possible. Home refinancing can make a lot of sense while interest rates are low. With vehicles, looking for zero-percentage-rate transfer opportunities can buy you time to pay down debt. But zero interest percentage periods are short lived after which interest rates can jump.
Consolidate debt into a home equity loan. Home equity loans typically have lower interest rates and the interest may be tax deductible, so you can pay off all high-interest debt and consolidate to one lower interest loan.
Stick to a list. Buying what you need and nothing more is the most economical way to shop. Using coupons and other discounts are good money maneuvers, too.
Add income. Part-time jobs, garage sales and selling items online are always smart bets to earn some extra $$$.
Get help from the pros. Say hello to the Federal Reserve. They have a credit card repayment calculator to illustrate the cost of carrying a balance on a credit card. This calculator will tell you how long it will take to pay off a credit card at your current payment rate. It’ll also tell you how much interest you’ll pay over the course of the loan. For personal investment and tax advice for savings, loans or new accounts, it’s worth enlisting the help of a local accountant, tax advisor or personal investment consultant. You’ll be on the right path in no time!
Related Topics: Finance