Did I hear you correctly? Feel like you’re trapped in the ferocious claws of debt and can’t find a way out? Don’t sweat it, folks. Listen carefully, one in every eight people in the good ol’ U.S. of A feels the same way, according to a revealing CreditCards.com survey. Sure, it sounds bleak, but hey! Pause and take a moment to realize something: a new year means a clean slate. Time to chuck out old financial woes and ring in some soothing money-magic. Below, I’m dishing out seven power-packed steps to help you chip away at that debt mountain. So, are you ready to snap the chains of financial burden and dive into the blithe freedom of a debt-less life?
Face your Debt Head-On
Facing debts can be like staring into the jaws of a gigantic beast. I get it, but remember, knowing your enemy si half the battle won. Our lovely pal Gail Cunningham from the National Foundation of Credit Counseling tells me she’s seen folks tremble with bags of unopened bills. Avoidance is never a good strategy, right?
To conquer, you first need to know the size of your adversary. What’s the total debt you’re wrestling? Whip out a “cash-flow calendar” to track down every penny you earn and spend, just as good ol’ Cunningham would have it.
Do you feel a sudden impulse to push this away? Bad call, folks! That’s a red flare signalling the task is overdue! “It can be terrifying to face the financial music, but trust me, acknowledging your spending pattern can be the siren call for serious change,” says our sage Cunningham.
Try the 10×10 Rule
Diving headfirst into radical budget-cuts might feel enticing at first but hold your horses! Kevin R. Weeks, president of the Association of Independent Consumer Credit Counseling Agencies, wisely opines, “Overhauling your finances overnight is like a falling star, it burns out quickly.”
Here’s where cunning Cunningham skips in with her ingenious 10×10 method: shave $10 off from 10 different spending categories each month. It won’t leave you feeling stripped off your favourite things, yet you’d still save a neat $100. Small steps, big differences—a no-brainer, isn’t it?
Use Cash Instead of Credit
Who doesn’t swoon over the swish-swipe-spree of credit cards? It’s tempting but often dupes us into reckless spending—not a great recipe for shaking off debts, is it? Does this ring any bells? If so, it might be time to break up with your plastic friends.
Switch to the good old green and you’re setting yourself up for a 20% drop in expenses, according to Cunningham. Grappling with real money makes you think twice; it feels more like gardening—careful sowing now means a spring of blossoming savings later.
Prioritize Holiday Debt
Navigating through the maze of debts can be a doozy, right? Calm down, you mainly got two roads to tread on: pay off the highest interest debts first to save on financial damage, or knock off small debts to boost your confidence. Choose whichever road feels more welcoming, as Weeks recommends.
A smart move, according to Cunningham, is making peace with your holiday debts before the first quarter ends. Your debt diary will thank you for it by shedding some serious weight. Don’t aim to strike gold at once; chip away one stone at a time. Does that sound more doable?
Lower Your Interest Rates
Don’t joust with those towering interest rates solo—wave your white flag and ask your lender for help. A fan-favourite plan is the balance transfer. It’s like a magic trick; you shift your balance to a new card, pay a small fee, and voila! You get 0% interest for a year or more. How about that for a deal?
Let’s put some numbers to this, shall we? Transfer a $5,000 balance, assuming a 3% fee, 12 months with no interest, and you’ve just saved yourself a cool $265.48!
If you need more cushioning, look for cards like Lake Michigan Credit Union Prime Platinum Visa: no transfer fee and a regular APR, starting at only 6%. Even better – just call up your card issuer and ask for a lower interest rate. Six out of ten cardholders bag this deal. It’s that easy!
Stop Giving the IRS an Interest-Free Loan
On average, U.S. Households get a refund of $3,034 in taxes. Rather than making your dough under a year-long lockdown with the IRS, how about you take charge and use it wisely now?
“Don’t give the government a free hand on YOUR money when you could use that cash to conquer your debts”, chimes in Cunningham. By adjusting your federal tax withholding using a W-4 form, you could save an extra $253 each month. That’s an annual saving of $3,036 right there!
Reach Out for Support
No shame in reaching out if you’re spiralling in debts. Infact, credit counseling can do wonders if student loans or medical bills are eating your headphones. Reach out to certified, nonprofit counselors at the National Foundation of Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.
However, if going pro feels a bit much, why not ask a friend to be your finance buddy? This genius idea comes from—no points for guessing—Cunningham. Regular checks and shares strengthen resolve. No one likes disappointing friends, right? An excellent motivator that!
Want more insight?
Check these out:
- Should I Save or Pay Off Debt?
- Should I Borrow Against my 401(k) or House to Pay Off My Credit Cards?
- How Do I Deal with Debt Collectors?
Catch more about financial resolutions:
- 7 Super Simple Ways to Simplify Your Finances in 2015
- Avoid These 5 Pitfalls That’ll Undermine Your New Year’s Resolutions
- 5 Career Questions That Will Make You More Successful in 2015