Personal Finance

Ten Tips for Getting out of Debt in the New Year

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Many New Year’s Resolutions revolve around things like learning something new or losing weight. Why not try focusing on getting out of debt for the New Year? Debt is one of the most common sources of stress and eliminating debt is one of the best things you can do for your future. Here are ten budgeting tips to save money and get you closer towards freedom from debt.

Create a Budget

If you have never sat down to create a budget now is as good of a time as any to learn. To start, write down out all of your household income, bills, and daily expenditures. Make sure you cover all possible unexpected expenses as well. Your second step is to reexamine all of your bills. Split your expenses into two categories; one category is unchangeable expenses like rent, mortgage and car payments. The other category is changeable expenses such as cheaper rates for cable, telephone or car insurance.

Keep a Spending Journal

Every time you spend money, write it down. Even paying small amounts of money such as roadway tolls can catch up with you. If every expense is not kept in check, you may create a negative balance in your bank account causing unnecessary overdraft fees. This also helps to create your budget as at the end of thirty days you may look through it to see where any spending can be reduced or eliminated.

Set Goals and Rewards for Yourself

One of the most important things you can do to get out of debt is to set reasonable goals. Set both short-term and long-term financial goals and reward yourself as you achieve them- motivation is a very important factor in achieving your goals. Review your budget and spending journal to determine what more you can do to get to reach them; there is always room for improvement.

Cut your Credit Cards

Examine all of your credit card interest rates and cut up the ones with the highest interest rates. You probably do not need more than two credit cards. Keep one card to use for emergencies only and one for basic purchases like gas if they can be paid easily every month. Work towards paying down the other credit cards with the money you saved.

Use Cash

Use cash as much and whenever possible. Many statistics show consumers spend up to twenty percent more when using a credit or debit card.

Keep Money in your Savings Account

One excellent way of building up your savings account is treating it like another bill. An easy way to do this is to have a certain amount deducted out of your income and deposited into your savings account each month. As you begin to pay bills off and reduce your debt, you can increase the amount you pay into your savings account. It is important to have money in your savings account should you have emergencies or any other unexpected financial need.

Consolidate your Debt

Consolidating your debt can be a great debt relief tool. It reduces many payments into a single monthly payment and many times can offer a lower interest rate than what you have been paying separately. This is an important way of cleaning up your credit, managing your debt and getting a handle on your finances.

Cut Out Luxuries

You can save a great deal of money by not eating out or eating so much, using less electricity, walking or biking to get to places or not buying a coffee every day. This does not have to last forever, but by cutting back temporarily you

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