Is money — or a lack thereof — stressing you out?
Although 2016 is nearly halfway over, there’s still plenty of time for you to get your personal finances in order and adopt some smart money behaviors that could make you debt-free by next year.
Following these seven money tips should help you pay off debt more efficiently so you can get that burdensome debt monkey off your back and kick off 2017 with a bang:
- Make a plan: “If you don’t have a plan, it’s hard to reach your goal,” writes Max Wong of Wise Bread. The first thing you need to get a handle on is the scope of your debt. It’s common for Americans to underestimate their credit card debt and student loan debt. You need to get an accurate tally of your debt load, so you know how much you have to pay off and then you can make a plan for getting your financial house in order.
- Stop using plastic: I’m not talking about plastic dishes here, I’m referring to credit cards. If you’re already struggling with debt, don’t add to your debt burden by using credit cards to pay for purchases. “If you cannot pay cash for something, then you cannot afford it,” writes Wong.
- Increase your card payments: If you’re only paying the minimum payment on your credit card bills, you could be hurting yourself financially by prolonging your payoff time. For example, consider this situation: you have a credit card with a $5,000 balance and a 12 percent APR. “If you pay the minimum monthly payment of $100, it will take you 70 months to pay off the card and you will pay an additional $1,966 in interest,” Wong explains. “But, if you raise your monthly payment to $120 per month, you can pay off the card in 50 months and pay $1,500 in interest.”
- Save for a rainy day: Socking away money in an emergency fund is a smart way to cover unexpected expenses — like a new water heater, a broken laptop or a leaky pipe. Wong writes that having an emergency account is the “financial equivalent” to a vehicle’s air bag. “It’s more likely that you’ll walk away from an accident if you’ve got something to cushion you against the crash,” Wong explains.
- Don’t try to keep up with the Joneses: Sure, it can be a little embarrassing to admit that you cannot afford to buy something, whether it’s plane tickets, a dinner out or even private school tuition for your children, but not purchasing things you don’t need or can’t afford is a smart money move. Don’t try to keep up with the Joneses, and you’ll be lining your pockets with the savings.
- Just ask: If you’ve had very little — if any — contact with your local bank or credit card company, that needs to change. If you are a longtime customer with a good payment record, you can always call your credit card company to request that they lower your APR. Your lender may also be able to set you up with a debt consolidation loan, which usually has lower interest rates than most credit cards.
- Make more money: Although tips on how to cut back on expenses and save money are great, they can only go so far. “After we cut, cut, cut to the bare bone, there is nothing left. Then what? The obvious, but not always pleasing, answer is to make more,” writes Kim Owens in The Huffington Post. “The fact remains that making more money (even while saving in other ways) is the best way to pare down your debt.”
Do you have any tips on getting out of debt? Share your comments below or on our Facebook page.