The following is a guest post by Holly Trillo
If you’ve started off the New Year with a worrying debt, you’re not alone. According to NerdWallet, the average U.S. household with debt carries a balance of $129,579 in total debt, with almost $16,000 of that attributed to credit card debt. If you’re ready to begin ridding yourself of heavy debt and its devastating consequences. Start 2016 off with a bang and use these tips to start eradicating your debt as quickly and as easily as possible.
Establish a Budget Immediately
The first thing you need to do is sit down and create a budget using something like Mint.com. Plan out all your future expenses by using a guide made up from your past few months of spending habits (this is when saving receipts comes in handy). Write down your projected monthly income, and factor in money for an emergency savings fund. Having a budget in mind and established guidelines will help you make better monetary decisions—you’ll definitely need to scale back on spending if you want to make any sort of headway with your debt issues.
Options for Debt Payment
The first hint for paying off your debt is to pay more than the minimum each month, especially if you’re only dealing with a few accounts. Creditors and banks capitalize with each extra month you spend taking to pay them back, and minimum payments will merely prolong your debt struggles, not get you out of them.
If you’re dealing with a multitude of debt accounts, you’ll want to consider the snowball or avalanche methods of making payments. Should you choose to use the avalanche method, your focus will be on paying off the accounts with the highest interest rates first, so as to avoid overpaying as time drags on. If you are feeling overwhelmed with the sheer number of accounts you’re paying off, you might benefit more from the snowball method, in which debtors pay off the smallest account first, checking off account by account. There’s no right way, and you’ll have advice telling you to do both—it’s simply a matter of choosing the method that works for you.
Put the Credit Card Away
Start the year off with a resolution to leave your card at home. It’s easy to use your card for everything, especially if you have a rewards card that gives you points or cash back. This habit can easily plummet you further into debt, and may in fact be the original cause of your current predicament. You’ve likely racked up a hefty amount of bills after the holidays, and your first goal should be to pay these off before even considering using your card in 2016. While you should keep up with any automated payments you have on the card, avoid taking it out on shopping outings. Instead of taking a credit card with you to grocery shop or buy clothing, pull out a sum of cash—when it runs out, your shopping is done.
If you’re in debt, then halt all luxury purchases. Whether its unnecessary travel plans, tickets to events, or new wardrobe purchases, avoid temptation; your top priority must shift to getting rid of your debt. Adding to what you already owe will do you no favors, and the longer it takes to pay it off, the more you will pay in hefty interest rates—meaning your credit card is costing you much more in the long run.
Hire a Professional
If you’re in dire need of financial assistance, or you’re just not sure what the best route for you, consider hiring professional help from a company like Community Tax services. Those trained in finance can help you save on taxes, keep you from digging a bigger hole, and get your debts settled as quickly as possible. As we draw closer to tax season, professionals may also be able to find hidden tax deductions and aid you in getting out of hot water with the IRS.
Debt can be terrifying, and beginning a New Year saddled with payments can make a fresh start seem almost impossible. Incorporating these techniques and tactics into your monetary decisions for the next 12 months can see you greeting January 2017 with open arms.