Steps to Getting Out of Debt in the New Year
As a New Year’s resolution, many people vowed to get out of debt or improve their credit in one way or another (myself included). For some of us this means climbing out from under a mountain of debt, while others just want to improve their financial stability. Although this is a great idea for a resolution, many people struggle with converting it into a reality, instead of just a fantasy come the end of January. The key to success is to identify the key steps in managing your money better, and to focus on the areas with which you struggle. Here are a few of the essential steps to getting out of debt in the New Year.
Know What You Owe
The first step is controlling our cash is to make a list of any debts you owe. This list should include not only who you owe the money to and how much, but also the interest rate on the debt. Using this information, prioritize the debts to determine which ones are the most important to pay off first. It is important not to wait on paying off the debts with the highest interest rate, as the longer you wait the more it will cost you.
Set a Budget
Making and maintaining a budget is essential to successful saving. If you do not already bank from your phone, then this is the first step. Get your banks app and set up your account. This will allow you to monitor your accounts, balances, and transaction anytime, anyplace. A good way to help stick to your budget is to physically keep a log of your expenses. You could record your spending in a columned ledger, or use a simple yet classy pocket notebook, like this Foray Hardbound Pocket Sized Journal for only $5.99 at Office Depot. This way, you can write them down as the transaction happens. By actually writing down your expenses, you will be forced to give them a second thought. This is an effective way to identify unnecessary expenditures, which brings us to the next tip…
Keeping close track of what you are spending and where will undoubtedly expose opportunities for you to cut back. In the New Year, see if there are places you didn’t realize you could cut costs. For instance, maybe you are no longer getting your moneys worth out of that gym membership. Even if your other resolution is to get in better shape, it is free to work out at the park. As I have said many times, nobody loves his or her television more than me. Although the cost of cable can add up quickly, the number of suitable alternatives is also larger than ever. Consider ditching the monster monthly cable bill for a more manageable mix of streaming services.
See if you can get more hours at your job. Filling your free time with work is a great strategy for saving for two reasons, the first is obvious: if you are working, you are making money. The other advantage is that if you are working, you are not being tempted to spend money going out. With this bigger paycheck, it is important to stay focused on the big picture. Based on your daily expenses, decide on a certain percentage of each paycheck that you can devote to paying off your bills, as well as a percentage that you put directly into your savings. This way you will get into the habit of saving money without thinking about it
Forget ‘Found Money’
The last tip for staying out of debt in the New Year is to forget about the idea of ‘found money.’ We have all had the feeling of money burning a hole in our pocket, but it is vital to resist the urge to spend ‘extra’ money. Especially as you start finding success with your saving, the temptation is going to present itself to splurge. While it is not bad to reward yourself for reaching milestones, remember that a penny saved is a penny earned.
Managing your money is not only a solid resolution but also an important life skill to maintain. As I have mentioned before, keep in mind that better habits are the goal, and don’t get caught up on minor slip-ups. Check here for some more tips on achieving this and other popular New Years resolutions!