2021 is just around the corner and it is time to start thinking about how you want it to be different. Resolutions are nice, but they rarely succeed. Goals are better. Ones that are reachable with a plan and steps to get you there.
If one of your goals for the new year is to get out of debt, it is time to start planning. Getting your plan in place before the end of the year will help you move into the new year ready to tackle your goal.
There are a few steps you can take to get yourself ready to successfully reach your goal in the new year:
1. Know Your Number
You cannot make a financial plan for reducing and paying off debt without knowing how much you owe. And that means everything. Every loan, every credit card, every past due bill, every friend you said you would pay back. Everything you owe should be written down in one spot. You will need to keep track of your debts and your payments in one place.
2. Request Your Credit Reports
There are old debts that could be lingering around on your credit report that you have forgotten about. If you don’t deal with them, they can remain on your report for several years, making it difficult to improve your credit score while you’re working hard to reduce your debt.
3. Accept Your Number
This can be the hardest step and that keeps people stuck in debt. If you really want to get serious about getting out of debt, it is time to accept the reality of your situation. You cannot go back in time and make different choices; you can only make better choices for the future. Accept where you are and get serious about moving forward.
4. Create a Budget
Creating a budget can be the biggest step you can take to get yourself out of debt. Start with how much money you bring in every month. Then, start subtracting all of your necessary monthly expenses like rent or mortgage, utility bills, car payments, groceries, etc. Have a plan for the leftover money. A little for extra expenses like entertainment and dining out, but the bulk should go towards your debt.
5. Improve Your Budget
You can improve the bottom line of your budget, creating more money for debt, in two ways. Reduce expenses or increase income. Start with looking for items to cut like high cable bills. Consider changing your cellphone plan to a more affordable one. Give up the gym membership or daily coffee shop.
Once you have cut everything you can, start thinking about how to increase your income so you can pay off debt faster. Ask for a raise at work. Get a part-time job. Start a part-time business.
Going into the new year with a plan for getting out of debt already in place will help you reach your goal successfully. Do not wait, start making your plan today!
Source: Clearpoint Blog
By Emily Burke