As we wind down the 4th quarter of 2018, this is the time where we might start reflecting on our finances and determine if we are in a better place than we were the year before. One of the ways to measure this is if we made any headway on our debt or if it is continuing to consume us. It is important to have a plan and maybe you could use a few tips.
1. Create a budget. It is crucial that you have a budget and get everything written down in black and white. See where your money is going. Then scrutinize those budget categories to see where you can cut costs. If you don’t scale back your spending, you’ll dig yourself into a deeper hole. Creating a budget also helps you avoid overspending, late fees, and overdraft fees.
2. Have 1 of these 2 strategies. Sort your credit card interest rates from highest to lowest, then tackle the card with the highest interest first. By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards.
The other strategy is to pay off your smallest balances first, and tackle these in the same fashion one by one. Some like the internal reward of seeing items paid off. Cut those cards up if they are not important to your long term strategy or leave them at home!
3. Pay more than the minimum balance. You need to pay more than the minimum balance on your credit card statements each month. Paying the minimum – usually 2 to 3 percent of the outstanding balance – only prolongs a debt payoff strategy. Strengthen your commitment to pay everything off by making weekly, instead of monthly, payments. Or if your minimum payment is $100, try doubling it and paying off $200 or more.
Even fixed payments like your car can benefit from paying extra. You will pay down the debt faster and spend less interest doing so.
4. Have a side hustle. Did you know the average millionaire has seven sources of income? Having a side hustle increases the amount of money you are bringing in so that you can be more flexible and intentional about paying off your debt. Use the earnings to tackle each debt one at a time.
5. Halt your credit card spending. Want to stop accumulating debt? Remove all credit cards from your wallet, and leave them at home when you go shopping. If you are really serious, cut them up (but don’t close them, you don’t want to affect your credit.
6. Put work bonuses toward debt. If you receive a job bonus around the holidays or during the year, allocate that money toward your debt payoff plan. Avoid the temptation to spend that bonus on a vacation or other luxury purchase or to blow it on the holidays. Be cost conscious with gifts and state your goals out loud that you are paying off debts this year. It’s more important to fix your financial situation than to buy extravagant gifts.
Find several gifts under $20 here along with my personal discount to keep yourself out of the stores during the holidays. You can even host a party with a friend or your favorite brands to earn free credits for gifts.
7. Delete credit card information from online stores. If you do a lot of online shopping at one retailer, you may have stored your credit card information on the site to make the checkout process easier. But that also makes it easier to charge items you don’t need.
8. Audit your bank statement for unused subscriptions that may be charging you. Because they are normally amounts under $10 you may not notice them but they are adding up. Also look for hidden fees on your actual bank account and opt for no fee, interest bearing accounts.
9. Build a small investment account. Build a small stock account based on free stock. Then apply your gains to your debt.
10. Sell unwanted household items. Have items collecting dust in your closet or garage? Search through your home, and look for items you can sell on eBay or Craigslist. Take quality photos, and write an attention-grabbing headline and description to sell the item as quickly as possible. Any profits from sales should go toward your debt.
11. Change your habits. Your daily habits can often hinder your progress. Spend some time thinking about how you spend money each day, each week and each month. Do you really need your daily latte? Can you bring your lunch to work or school instead of buying it four times a week? What can you change without sacrificing my lifestyle too much? Turn these daily indulgences into rewards.
12. Reward yourself when you reach milestones. You won’t pay down your debt any faster if you view it as a form of punishment. So reward yourself when you hit milestones. The only way to completely pay off your credit card debt is to keep at it, and to do that, you must keep yourself motivated.
Hope these tips helped! Feel free to share additional tips you may have.
Nerissa, the BizeMillenial
Nerissa, wife and mom of 4 is originally from VA and now lives in LA. She has had a 10+ year career in Banking and Management among other experience. She enjoys reading, traveling, and helping others grow and be successful. Connect with her on multiple platforms.