The New Year is here, and a lot of people are busy making good on their annual goals and resolutions. For many, getting out of debt and improving their finances is at the top of the list.
Lowering your debt can be a big and almost overwhelming goal. It’s not a fast process and it takes a lot of dedication, but it is worth the effort.
Begin the process
A good place to start is by getting an accurate picture of where your finances are now. So gather up all of your recent financial statements. This includes credit cards, car loans, student loans, any personal loans or other big-ticket items, and your monthly mortgage payment.
Run your credit report. You can request a free copy ever year at www.annualcreditreport.com from all three major credit bureaus (Experian, Equifax, TransUnion) While you’re getting your results, this is a great time to check for any mistakes and make sure that every debt on your credit report is included in your list.
Create a payoff plan. Create a spreadsheet or paper notepad with all of your debt information. Include the name of the debt, total balance, interest rate, and minimum payment required.
Attack that Debt!
Now figure out what order you want to attack your debt. Some people organize them from lowest to highest balance, while others prefer to pay off the one with the highest interest rate first. Whatever you decide, here’s the trick: Once you pay off your first debt, combine that payment with the second debt. Now you’re paying much more than the minimum and you’ll pay off the second debt much faster! Then do that for the next debt and before you know it you’ll be in much better shape financially.
In addition, find ways to keep adding money at your payoff. Sell unused items around the house, have a yard sale, clip coupons, or get a part-time job. Just do whatever it takes to keep your momentum up!
Get the Whole Family Involved
Make improving your financial situation a family goal! Put your payoff on the fridge and count down. For instance, have the kids help with the family budget. When everyone understands what you’re working toward, they’ll be more likely to cooperate when the budget is tight.
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