Debt is a terrible four-letter word. If you find yourself in an endless cycle of managing your debts and never feeling free, then isn’t it time you made a change? The New Year is the perfect time to take hold of your finances and start clearing your debts. Make a plan of how you’re going to get debt free in 2018, using the tips below.
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Face the reality of what you owe
Do you know down to the penny what it is that you owe? The chances are that you have a rough estimate, but not necessarily the full amount. You may even find that your estimate is way off, which could affect your situation further. Spend time sitting down and going through all of your accounts to establish what you need to pay back. Sometimes staring a problem in the face can force you into action, so this could be the wake-up call you need to face the reality of your debt situation.
Deal with inaccuracies or problems
After working out what all of your debts are, you might realize that some of them are not relevant to you or that you’ve been overcharged for something, like your student loan. If you do find any discrepancies, contact the lenders and see if they can correct them or offer some solutions. Some student loan companies have come under fire for the way they’ve been misleading borrowers, so it’s worth looking into a Navient lawsuit or another type of legal action to get back what’s yours. Questioning inaccuracies is something that many people fail to do, but this could be your chance to reduce your debts and make sure that what you owe is fair.
Make a plan to clear them off, one-by-one
Now that you know exactly what you owe, you can focus on how you’re going to pay it back. Make a list of all of your debts and what the interest rates are. It makes sense to pay back the debts with the highest interest rate first so that you’ll pay less money back overall. Work out how much you can afford to put aside each month to clear your debts, weighting the amounts depending on their interest and so on. The ones with no or low interest can receive minimum payments until you’ve cleared the bigger balances, with the amount you’re able to clear increasing each month as the interest begins to decrease.
Create instant savings on your utilities
Your utilities are one area where you can make a lot of savings without having to get rid of anything. Changing your suppliers or negotiating better rates can free up some extra money that can then be put towards clearing your debts quicker. In January, make a point of contacting all of your suppliers and seeing if they can offer you a better deal – sometimes the threat of switching is enough to push them into a significant saving.
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Aside from cutting your monthly rate, there are other ways you can save money on your energy bills – including some environmentally-friendly options to help your household go greener too.
Take a long look at what you spend each month
Another good way to shock yourself into taking action is to analyze your monthly spending. Keep receipts for everything you buy from your morning Starbucks to your dining out costs – leave no cent unscrutinized. Doing this will instantly highlight areas where you could be cutting back. A morning coffee might seem like an inexpensive $4 a day but added up over a month and you’re talking over $100.
Find the areas where you’re spending the most and see if you could cut them down. Taking a coffee from home is a great idea to help you get your caffeine fix while walking to work instead of taking the bus or train a couple of times a week could also help you make a saving. Cut down on your monthly spending and put the savings towards your debt repayments.
Consider consolidating your debt
The subject of debt consolidation can be a tricky one. For some people, this is a great way to manage your debts, cutting them down to one payment that will make it easier to keep track of what you owe. When you ask yourself if you should get a consolidation loan, you should look at the interest rate of the loan and whether it will actually take you longer to pay everything back in this way. Don’t get taken in by commercials that say it’s the best option without investigating it properly. The last thing you want is to find yourself with even more debt to pay off than you started with.
Change your attitude towards spending
If you want to start clearing debts and being responsible with your spending, you need to change your attitude first. The culture of wanting things now rather than saving to earn them is a tough one to break, but if you’re going to enjoy a healthier financial future then this is one of the ways to do it. This isn’t to say that you can’t treat yourself now and then, but you should save for your treats so that you’re not simply impulse buying things you don’t really need.
Changing your approach to spending is one of the smart ways to clear credit card debt, where you have to ask yourself if you really need something before you buy it. Try using cash instead of paying with cards to give you a more realistic sense of what you’re spending. This will also help you to avoid any nasty surprises when you check your balances.
Taking steps to go get debt-free is a mature and sensible approach to your finances. When it comes to buying a property, saving for your kids’ college tuition or simply preparing for retirement – you’ll be in a much more secure position to do so. As one New Year’s resolution you’ll want to keep, it’s a great time to start taking care of your financial future.