If your New Year’s home-owner resolution is to get out of debt or not, here is some great advice on how to pare down your spending and free yourself from the slavery of debt. To accomplish this, you need a plan and you must be willing to execute that plan. It is never too late to clean up a debt mess or just simply make a plan to pay off accrued debt. Living within your means might sound ‘old-fashioned” but it really is the new future for you and anyone who owns a home.
Prepare to get out of debt
- Gather all your recent statements for what you owe
- Obtain your free annual credit report
- Calculate what you make on a monthly scale
Make a List
- List what you owe in order of highest interest rate to lowest.
- Write down for each creditor what the 3 year plan is to drop this balance(should be listed on your statement)
- Remember to include any loans that might be private( i.e : family or friends)
- Write down when you get paid each month. Circle these on a calendar that hangs right where you typically pay your bills.
Lower your rates and/or consolidate loans
- Refinance your home if this is possible. This will yield the lowest interest rate on your total debt. If your monthly payments are less total then commit to pay that difference off with an extra loan payment each month off your principle balance. You can arrange to have extra house payments too and that will decrease the amount of time you owe on your loan.
- Call your credit card companies and see if you qualify to lower your interest rates.
- Transferring your balance from an interest accruing card to a 18 month interest free card can be very helpful but be extra sure you can make your payments on time, check to see what the interest rate will be when the deal expires and be diligent. You can pay down a balance quickly by making 2-3 times the minimum payment. This can be risky if you are not disciplined but if you do it correctly your balance will shed its weight pretty quickly!
Plan your strategy
- Plan out how much you can afford to plug into paying off your debt as quickly as you can.
- Get your pay off amounts and post them where you are accountable
- Plan when one debt is paid to plug that monthly payment into the next debt for faster pay off schedules.
- Plan what cards and loans you will keep and what ones you will be done with once they are paid off.
- Have a money saving plan too.Always pay yourself no matter how little that amount is, it matters. A rainy day fund will save you from getting further into debt in the future.
Monitor and adjust
- Monitor your progress every month
- Adjust your payments when need be
- Have someone you are accountable too like your spouse and check in with them frequently.
Paying off debt is extraordinarily satisfying and freeing. Most people get themselves into some kind of debt during their lifetime. Now is not the time to give up or beat yourself up over maybe some not wise choices, it is the time to pull yourself up by your bootstraps and get to work. Your reward will be self -sufficiency and a clear conscience and wallet. When you are free from debt you are free to do things you have dreamed of for years! Happy New year and happy spending/saving.