As the new year is coming right around the corner, it’s never a bad time to start brainstorming some goals you want to set. After all, a new year gives you a new slate, one to form new habits and take control of the things you’ve always wanted to do. And if getting yourself out of debt is one of them, then luckily for you, I’ve prepared a few helpful tips to get started with. Check them out below:
Consider A Balance Transfer
One of the best ways to knock out your credit card debt is a balance transfer. A balance transfer is essentially when you transfer your current credit card debts to a new one, mostly due to a lower interest rate (or even none at all). This will give you some breathing room to start taking care of other obligations, as well as lessen the number of due dates that you might have to keep track of.
When searching for a balance transfer card, first add up the current credit card debts you have, including interest rates, annual/membership fees, as well as when you might be getting hit with late fees. With this total, assess what’s a reasonable monthly payment you could afford over the duration you intend to pay this back. This will be a heavy indicator as to what type of interest rate you might be able to get between cards that might not charge interest for a year or one that might not have a grace period but is an overall cheaper rate. Overall, the name of the game here is to get that interest rate down or eliminated so you can move on to a better footing financially.
Look At Debt Consolidation Loans
Another popular strategy similar to a balance transfer is a debt consolidation loan, which can encompass a much wider range of debt. These can be great if you’re trying to combine your credit card, personal loans, and any other outstanding debt into one payment. However, taking this route can negatively impact your credit score.
For example, according to NerdWallet, the average American has roughly $16,883 in credit card debt, and while consolidating that to a loan might be advantageous, they also might be losing out on the initial interest rate they got with their other loans. All-in-all, the decision is ultimately up to you regarding what route would be most advantageous to go down, just make sure that you do your homework first.
Focus On Savings
If there’s one thing a lot of us could get better at, it’s with saving money. As noted by GoBankingRate, a staggering 62% of Americans have less than $1,000 in their savings account. And if you find yourself in that category, then it’d be wise to start figuring out what you can set aside.
Create a plan within your budget to set aside a certain percentage of your pay. While I understand a rate of 10 or 20 percent might seem a bit steep when you’re trying to work on other debt, even just 3-5 percent can go a long way. As savings will require developing a fair amount of discipline, it’s going to be a tough habit to get into. But once you do, you’ll start building a nest egg in no time.
Although it sounds dangerous, investing in the stock market can actually be an excellent long-term strategy to getting out of debt. I’ll note the market is no get-rich-quick scheme; it is a solid means to see a reasonable growth over a 5-10 year period. As Business Insider notes, playing the long game is something that millennials don’t see much value in, with only around 30 percent invested in the markets. However, with the right portfolio, you can get yourself out of debt utilizing markets within a few years.
Cut Back On Excess Spending
Finally, even though it’s not always the most fun strategy, cutting back on excess spending is a great way to increase your cash flow for your debts. Granted, this doesn’t necessarily mean not having fun at all, but it does mean refocusing your spending on where it really matters.
For example, according to Statista, people eat takeout or restaurant food for lunch roughly 72 percent of the time. And while I know that can sometimes be a nice sanctuary away from work, perhaps packing lunch once in awhile could put that money towards a nice dinner. Little practices like this are important for your financial health, and something to be mindful of moving forward.
What are some strategies you plan on utilizing to get out of debt? Leave your opinions in the comment section below!