Thursday, January 9, 2014

Get Out of Debt in 2014

Tips for Consolidating Credit Cards & Eliminating Debts in the New Year

get out of debt
New Year’s Resolutions can come in a variety of forms; eating healthy, working out and getting organized are all things that hit many people’s resolution list. But what about paying off credit cards or eliminating debt? For some Americans, paying off debt is high on their list, but getting this task checked off may be difficult. Here are some tips to help become debt free in 2014.

Using a Budget to Get Out of Debt

The first step in any savings or debt elimination plan is making a good budget. This is important for keeping finances on track and helping achieve money goals. A good budget will include all priority expenses including bills, groceries, and gas. This budget should also include an emergency fund; this fund will help cut down on credit card use for unforeseen expenses including car repairs or emergency medical bills. Taking a look at where money is going will make it easier to cut unneeded spending and pay off more debt every month.

Not Using & Consolidating Credit Cards

Many people suffer from the credit card debt cycle; paying the minimum balance every month while continuing to rack up charges. The only way to stop this cycle is to stop using credit cards, period. Instead of using credit cards to pay for unexpected expenses or make purchases between paychecks, set aside funds into an emergency account. This will help eliminate the need for credit cards while also making it possible to cover unforeseen purchases.

Consolidating multiple lines of credit can also be helpful in reducing debt. If multiple credit cards have racked up debt, look into consolidating the balances onto one, low interest line of credit. This will help organize payments while also having a larger impact on the balance. A lower interest rate will also help a higher percentage of monthly payments chip away at the card’s actual balance.

Getting Out of Debt by Cutting Frivolous Spending

Eating out regularly and spending money on unnecessary items can add up quickly and eat away discretionary spending funds in a flash. This is not saying that enjoying take out every once and a while needs to stop, but spending money frivolously throughout the month can have a big impact. By cutting back on this kind of spending, more money can be put towards paying off debts or into savings every month. Even shaving $250 off a monthly budget can add up to $3,000 over a year, a good chunk of money to put towards any outstanding balances.

Having debt is something that has become the norm for many Americans, but that does not mean they have to accept it. Using a budget, managing credit cards, and cutting unnecessary spending can all be ways to help pay off debts faster and build up a large savings account. The New Year is a great time to start fresh and build a strong financial future!

*Photo Courtesy of Lending Memo via Creative Commons License

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