At the start of every new year, many make resolutions to better themselves in the upcoming twelve months. A favorite new year’s goal for those living with debt is to transform their financial situation for the better. The goal is admirable in theory but difficult in practice. One of the hardest parts is understanding where to begin. If you are struggling to take your first steps towards the right direction, the following tips offer a simple foundation:
1. Establish a Budget
The first step in creating a more stable financial future is the creation of a budget.
A budget is merely the allocations of your spending throughout a month. The key to a working budget is discipline. Keeping your spending within the amount set for the entire month’s duration will help you stretch your income farther. To keep track of your spending, create a spreadsheet where every purchase is meticulously tracked to visualize your spending. (Or, try out our easy online budget calculator!)
If you’re struggling with creating a budget try the 50/30/20 method. This budgeting method breaks your spending into three categories, Need/Want/Save.
Each category is given a percentage of your income; 50%, 30%, and 20% respectively. Each household has a different budget depending on their goals, but the 50/30/20 method offers a good starting point.
2. Target Your Debt
Many Americans struggle under the heavy weight of debt. With high interest rates ballooning your debt, it can quickly feel like your monthly payments are doing little to help reach your final goal of becoming free from debt.
The minimum payment amount is a great suggestion to aid you in not missing payments each month, but it won’t eliminate your debt quickly enough.
This new year, become strategic in how you attack your debt. Reorganize your repayment approach to make more significant progress. Prioritize debts with higher interest rates to receive your highest payments. Each passing month puts you farther away from your actual goal if you’re only paying the minimum. A smart payment plan helps eliminate debt instead of passing it to the next month.
3. Begin Investing Your Spare Change
Dip your toe in the investing pool with smartphone apps like Acorns or Betterment. With just the spare change from your daily purchases, you can test out your interest in investing. Investing is a great way to make your money work for you by taking unused funds to reap financial rewards. It can also be a scary venture for novices with its high risks. Apps like these invest in a diversified approach that minimizes risk (and to a degree, the reward) so that you don’t feel like you’re putting your wellbeing on the line to make an extra buck.
4. Hire a Credit Counselor
Sometimes your financial situation is tricky, and the need for a credit counselor is necessary to help navigate this tough time. Credit counselors offer advice on topics such as budget and debt repayment. Be aware; some credit counseling services are more interesting in profit than assisting you.
Choose a nonprofit credit counseling option like CreditGUARD. Our certified credit counselors are ready to pass on their financial wisdom to you through credit counseling and debt management programs. They’re prepared to help you reach your new year’s goal of a brighter future.
Call CreditGUARD today to get started!