Is your New Year’s Resolution to get out of debt? Improving your finances and increasing your savings is a common goal on Jan. 1, but it’s not always easy, especially this year.
If you’re in debt, you’re not alone. With COVID-19 causing budgets to be stretched in many households, total American household debt is only rising. According to the U.S. Federal Reserve’s Center for Microeconomic Data, “total household debt increased by $87 billion... in the third quarter of 2020.” The relief measures offered by the CARES Act and other programs have provided much-needed funds, but many consumers find themselves owing more money.
Although getting out of debt, especially credit card debt, may seem daunting, it can start you on the road to financial freedom and wealth creation.
If you want to get your finances in order in 2021 and stick to your New Year’s Resolution, one step would be to take a closer look at your credit cards. Credit cards are known for their high interest rates, and this can waste a lot of money over time. See if you can use a balance transfer offer to switch to a card with a lower rate. Do your research on BBB.org first; consumers nationwide filed more than 11.000 complaints against credit services companies in 2020. If you have multiple cards, decide which debt-paying strategy is best for you. Some experts recommend paying off cards with the highest interest rates first, but others recommend paying off cards with the smallest balances first – figure out what works best for you.
Don’t waste money on unethical businesses or scams. When making a purchase or choosing a business, always check with BBB. Making careful decisions now can save you time, money, and headaches later.
Start budgeting. Creating a written budget and tracking your spending is one of the best ways to save money and stop spending more than you earn! First, figure out how much debt you have; you need an accurate picture before you can figure out your budget. Note the difference between fixed expenses, needs, and wants. If you have debt, include repayment goals in your budget.
