With the start of the New Year, make 2017 the year that you get your finances on track. Here are some credit counselling tips to help you start your new year off right:
Make a Budget and Stick to It
Repaying your current debts as well as balancing future debt is all about budgeting your expenses. Create a monthly budget that includes all of your recurring, semi-annual, and yearly expenses, as well as an amount for debt repayment.
Try to factor in and account for extras and emergencies that you may not always think of by totaling the amounts needed for these items and saving a small amount a month in a reserve fund. Getting a handle on your actual monthly expenses will help you get a more realistic picture of your financial situation. By creating a monthly calendar you can make sure that you don’t overspend money that you’ll need for non-monthly or out of the ordinary payments later. If you can stick to your budget month by month, you’ll slowly see your debt disappear.
Once you’ve dealt with your existing debt and have built a reserve fund for emergencies, you can begin saving. The most important thing to remember about saving is to create realistic, achievable, and productive goals so that you motivate yourself to save.
Remember That Small Purchases Add Up
It’s important to remember that you need to budget and limit small and impulse purchases. It may not seem like a big deal to get a coffee a day, but that adds up fast; a coffee a day will cost you $60 -$80 a month.
Remember, you can buy a tub of coffee for about $10 that will last you a few months. These little purchases seem small each time you make them and give you the illusion that they aren’t hurting your finances. However, when you add them up, these can be a big reason why you’re overspending and having problems managing your budget.
Pay Down Debt Efficiently
Although there are various strategies to paying down your debts, you will pay the least amount of interest if you pay your debts with the highest interest rates first.
Ultimately, the longer you are paying the high-interest debts, the more interest you will pay.
However, paying down your lowest interest debts first, especially if they are small balances, can give you a sense of accomplishment and provide motivation to continue working towards eliminating the remainder of your debts.
Choose the strategy that you feel would best motivate you to stick with your budget, and if it’s not working, try another strategy until you find one that works.
Use Credit Sparingly
If you already have significant debts, the first thing to do is make sure you aren’t creating more debt. Be cautious when using credit and make sure that you use your credit cards only when necessary.
When possible, try to take out the cash necessary to buy the day’s items that have been budgeted for, which should curb the urge and ability to purchase items outside the budget.
Even if you have to go back to purchase an item the next day with cash, having 24 hours to think the purchase through allows for an important cooling off period to determine if the item is essential. It’s also best only to use credit cards when you have the money to pay them back immediately. This will ensure you never go farther into debt.
Pay More Than Your Minimum Balance
Paying only your minimum balance usually doesn’t even cover the interest being accrued, and therefore you are probably still increasing your debt.
The best way to pay down your debt quickly is to pay more than the minimum balance necessary on your credit cards. Even if you can’t add a lot, paying an additional amount above the minimum due each time will help you reduce your debt faster and slowly eliminate it.
Spend Less Than You Plan to Spend
Challenge yourself to spend less than your budget allows for, and reward yourself by putting half the extra money into savings and the other half to further pay off current debts. Hopefully, the reward of both saving and reducing your debt will motivate you to further reduce your monthly budget.
If your grocery bills are around $80 a week and you’re able to cut it down to $70 by using coupons, taking advantage of sales, and price comparing, that extra $40 a month can further reduce your debts.
Any time you save some extra cash from your budget, don’t consider it extra money, instead, put it towards your debt and help yourself climb out of it. This way, instead of enjoying a treat now and continuing on in debt, you’ll end up reducing your debt and then can spend any extra money on yourself without any guilt!
Pay Using Cash
A number of studies have shown that paying with cash will help reduce your tendency to spend and can even reduce the actual amount that you spend.
People are more likely to spend more money when they are using credit instead of cash, so sticking to cash may help you cut down your costs and manage your spending without you really realizing it. This can be a great way to subconsciously reduce your debt and help get out of it.
Many plans offer points that you can collect, which encourage you to spend on credit cards. This has been proven to increase your spending on a credit card whereas if you were to make purchases using cash you would spend less.
Therefore, cutting back on using credit and using cash can be a great way to help you fight rising debts and eliminate them altogether.
Speak With a Licensed Insolvency Trustee
If you’d like professional, tailored, and personalized credit counselling advice, consultation, and services, your team at Spergel is here to help.
If for any reason you think you could benefit from speaking with us about your options regarding your debts, please contact us at Spergel. Our team of experienced, dedicated, and reliable personnel will provide you the best advice and support necessary to help you with your debt.
On top of this, we’ll give you the knowledge and tools to help deal with your debt problem and work towards eliminating it.
How to Effectively Manage Your Credit in 2017
If you follow these simple principles to debt management, you should start to see an improvement in your spending and a reduction of your debts.
These tactics are some of the best ways to reduce and manage your debts so that you can get your finances under control and work towards financial success in the new year.