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March 16, 2018

Spring Cleaning for Your Finances-Paying Off Your Debt

It’s the time of year for spring cleaning. So many things need your attention...your closets, your garage, and...your finances?

It’s tempting to just make the minimum payments for your credit cards each month but, as you probably know, not only does that cost you more in the long run, it will take you even longer to be debt-free. So this spring, put the mop and broom aside and start cleaning up your debt!

Get organized to get started

Keep a log of your usual monthly expenses (both fixed and variable) and compare it to your income. See where you can cut some expenses so that you have extra money to apply to your debt. Even small cuts to your budget can add up quickly. For example, eliminating just one meal out per week can make an impact on your expenses and give you more money to use for debt reduction.

Vacuum debt away by transferring your balances to a lower rate card

This has a double benefit. Many low-rate offers are available for a limited time after you open the card, so to take advantage of the lower rate, you’ll be more likely to find ways to pay off all or most of your debt during that introductory period. (Just be sure to find a card that doesn’t also charge a hefty fee for the transfer.)

Make your savings shine

If your paycheck direct deposits into your bank account, set it up so that your money will be automatically assigned to designated purposes. For example, use your checking account only for “daily living” expenses and bills, and consider separate savings accounts for everything else (i.e. unplanned expenses, investments and future large purchases).

This works because it forces you to look at where your money is going, and requires an extra step if you think you need to get money from your savings account.

Tidy up your spending habits

Paying off your debt won’t matter if you just turn around and end up “making a mess” again. Remaining debt-free is a lifestyle change, which may require you to completely rethink your approach to money. Taking a hard look at what caused your debt to begin with, and taking steps to prevent it from happening again, is the key to keeping your finances “clean” all year long.