Many resolutions for the new year focus on reducing credit card debt. People are looking for suggestions and tips they can use to reduce financial stress and debt.
Here are nine tips to pay down debt:
1. Get organized. Write down everything you owe, the interest rates and the minimum payments. Why? Writing down our financial facts can help us face them and move forward. Know how much you owe.
2. Get a budgeting worksheet and write down your current monthly expenses. Look for spending leaks-areas where you can reduce spending and then apply that money toward your bills. For example, reduce discretionary expenses like eating out and entertainment. Call your phone, cable and internet providers and ask about other less expensive service options.
3. Make it your goal to consistently spend less than what you make, and to save money for specific goals that matter to you.
4. Make at least the minimum payment on all debts. Use the extra money you save from reducing expenses to pay the maximum amount you can on the debt with the smallest balance. If you have two debts with roughly equal balances, pay the one with the higher interest rate first.
5. Don't take on new debt. If you normally carry many credit cards, and spend impulsively, you need to break that habit. Just carry one credit card or debit card and only use it when you genuinely need it.
6. Increase your emergency savings, so when unexpected expenses come, you can use savings rather than credit.
7. Use a "want list" for larger purchases. Do you really need that item or is it a buying impulse that will pass? If you really need it, check your budget or spending plan to see if you can afford it.
8. Every pay period, set aside money for future expenses like car repairs, vacations and start saving now for Christmas in 2013.
9. Use the FISC money management system or a similar system that has flexible, realistic spending guidelines that helps you live within your income. Meet with a non-profit financial counselor to see if they have any recommendations you can implement.
It takes willpower and determination to change our spending habits and adopt new habits. Financial counseling can help people get a clear picture of their financial situation and the options available to improve it.
If you know someone who is ready to make financial changes they can find a non-profit credit counselor through the National Foundation for Credit Counseling at www.nfcc.org. or by calling 800-388-2227.
- Alan Prahl is with FISC, a nonprofit program of Goodwill NCW. He can be reached at email@example.com.