There are lots of New Year resolutions that are made every year but sadly, few are ever realized. To how to get out of debt should be one.
If you are struggling with debt, this might be one resolution that you may want to seriously consider. At the very least, lay the groundwork in 2016 that will change your life for years to come.
Know What You Owe
This may seem like common sense, but many people simply don’t know.
Start by tallying up your monthly expenses. Rent/mortgage, credit cards, electric bill, car loan, food, school loans. You simply want to know what your expenses are compared to your monthly net (after deductions) income.
There’s nothing like seeing your spending staring back at you because it could force a much needed behavioral change—especially when it comes to spending money on non-essential goods and services.
Follow the 10×10 Rule
Some resolutions, including a resolution to get out of debt, take time. If you want to create a debt-repayment plan that will succeed, set realistic goals. From a spending perspective, the experts advise to curb rather than cut your spending. Start by following the 10×10 rule. That is, if you could shave $10 off ten of your non-essential spending accounts every month such as dining out, cable/movies, online and brick and mortar retail shopping, Starbucks coffee, and other non-essential luxuries, you’d never miss it or feel deprived—but you would have an extra $100 in your pocket.
Researchers have found that when people shop with credit cards and gift certificates, they are more likely to make impulse purchases on luxury items. If that sounds like you, cut up the plastic. Force yourself to feel the pain associated with spending real money by going on a cash-only diet. Studies have shown that people who convert to a cash only life-style typically save 20% over their previous spending ways.
How to Get Out of Holiday Debt First
There are two possible strategies that you can use when it comes to prioritizing which account to tackle first: You can pay off your highest interest-rate balances first to minimize the finance charges or you can focus your efforts on eliminating a smaller debt to build confidence and momentum.
To decide which path is best, you need to understand what motivates you. Then, whatever method you choose, set a goal of paying off all your holiday debt by the first half of 2016—or sooner. This approach will keep you from dragging that debt along throughout the entire year.
Reduce Your Rates
CreditCards.com reports that two-thirds of people who ask for a lower credit card interest rate, get it. So this is a good place to start.
You can also try a balance transfer. Many credit card companies offer promotions of 0% interest for a year or more for a small fee if you transfer your debt to them. This is a great way to reduce your payments as long as you satisfy the terms and conditions of the plan. It also offers an incentive because it is a time-sensitive plan—forcing you to pay off your debt before the 0% interest offer expires.
Stop lending money to the IRS
The average household received a $3,034 tax refund last year. In other words, an extra $253 was taken out of their paycheck every month and loaned to the IRS—interest free! Wouldn’t it be nice to have this extra money to pay down your debt? If you generally receive a refund every year, adjust your withholding on a W-4 tax form and file it with your Human Resources Department. Use the government’s withholding calculator to figure out exactly how many allowances you should take or speak with a tax consultant.
Don’t go it alone – debt settlement
By partnering with a trusted and proven industry leader, all of your unsecured and credit card debt can actually be reduced and eliminated. S&N Debt Solutions is a BBB accredited debt settlement business with an A+ rating and publicizes that its typical client can expect a 50-55% reduction in the debt owed to creditors and you could get out of debt in 24-36 months—or sooner! This debt relief alternative just might be what you need to achieve your New Year’s resolution. To find out how much you can save and how fast we can get you out of debt, start here.
Start the New Year off right. Put a doable plan in place to rid yourself of your troublesome debt—especially your high interest credit card debt. It can be done. You just need to have a plan and the will to make it happen.