The holiday’s are upon us, and for some, that means they could fall into debt when they didn’t have debt before. Or, some could just add onto their already mounting debt to give everyone something for the holiday’s. It is super important that you don’t sacrifice your financial health for the rest of the year on this holiday. The last thing you want to worry about for the new year is paying off debt the rest of the year for this one day.
But, if you insist in doing so, or you already have debt that you want to get rid of, we have some great steps to get you going in the right direction.
If you want to start managing your money better, getting out of debt is the first step. Unfortunately, that’s a lot easier said than done. It’s easy to get into debt and it takes no time at all, but paying off that debt is a lot tougher and it can take a long time. But if you do it right, there are ways to pay off your debt quickly and get your finances in order again. Here’s how you can dig yourself out of the debt hole in the next year.
Avoid Any Missed Payments
Before you start paying off the debt, you need to make sure that it doesn’t get any worse. Missed payments can incur charges and interest, so it’s vital that you avoid any missed payments from here on out. It may seem like the last thing you should be doing right now, but this sometimes means borrowing more money. If you have old debts that you cannot afford to pay, and the creditors are looking to collect, you need to get them off your back right away. If you borrow money from somewhere else to clear those urgent debts, you give yourself a bit of breathing room while you sort your finances out.
The best way to do this is to find a zero percent interest credit card. These deals usually give you 6 months to a year before interest payments kick in. If you can use this to pay down any high interest or urgent debts, then pay it off before the interest payments start, you can save yourself some money.
Unfortunately, you may struggle to get these deals if you have a lot of debt and your credit score is low. But there are some companies that offer loans for bad credit score so you will still be able to borrow money. However, you will have to pay interest on these loans. If you are going to borrow money to clear urgent debts, always make sure that you will be able to pay them off in time so you don’t end up back where you started.
The next step is to start cutting expenses so you can make sure that you always make debt repayments on time each month. If you can’t pay every single payment on time every month, you will struggle to get out of debt. You need to look over your budget and consider each expense, and whether it is necessary or not. There are some simple ways to save money on your monthly expenses, like transferring debt onto a zero percent interest card, getting rid of expensive TV subscriptions, and cutting back on eating out. You will have to give up some luxuries for a while, but once you have cleared your debts, you will be able to afford these things again.
Pay More Than The Minimum Payment
If you pay the minimum payment on a debt, most of that is just covering the interest and you are clearing the original debt very slowly. It can take years to pay it off if you do it this way, but if you have made some big cutbacks on your budget, you should be able to afford to pay higher than the minimum payment. Make sure that all of your necessary expenses are covered first, and then put whatever you can afford into your debt payments.
Build An Emergency Fund
It may be tempting to put everything that you have left into your debt payments, however, that is not always a good strategy. Some of your surplus income should go into an emergency fund instead. If you don’t have an emergency fund in place and you get hit with an unexpected expense like car repairs, you may end up having to borrow money to cover the cost. That means you’re adding to your debt and digging yourself further into that hole. But if you are contributing to an emergency fund at the same time as paying off your debts, you protect yourself and avoid further borrowing.
The Debt Snowball Method
If you have a lot of debts, you should use the debt snowball method. Order all of your debts from smallest to largest, then continue paying the minimum payment on the larger ones while you pay over the minimum on the lower ones. This will clear the smaller debts quickly, and then you can start paying that extra money towards the next one on the list. The snowball effect will help you to clear debts quickly and by the time you reach the higher end of the list, you will be able to pay way over the minimum.
When you are in serious debt, it may feel like you are never going to get out of it. But if you follow these steps, you can clear all of your debts in the next year.