Debt sneaks up on you a little like those few extra pounds you packed on over the holidays. Before you know it, the credit cards that you were saving for emergencies are maxed out from the little charges you didn’t think were a big deal, your mortgage on your home was transferred to a company that hiked your interest rate, or your car was totaled and you need to finance a new one.
When you feel like your debt is spiraling out of control, take a step back and a deep breath – you can fix the mess that hit the fan by following these five ways to take control and sort out your personal finances.
- Set Your Goals
Where do you want to be financially in one year? Five years? Ten? Retirement? Your goals for the future rely on your money savvy today.
Long term goals may include things like getting out of debt completely, traveling extensively, buying a home or retiring. Short term goals might include decreasing your spending, paying off small credit cards or stopping the use of them altogether, or creating a budget.
Having goals to work towards will help you keep your target in sight as you take control of your finances.
- Create a Budget and Stick to It
Make a list of all of your bills, their payoff amounts if any, and the interest that is charged to you if applicable. Consider all of your discretionary purchases. You may need an itemized bank statement to get a true grasp of where your major spending is. Determine what areas you need to reduce spending on and when your bills are due so you can avoid late fees.
- Take Control of Your Interest Rates
With all of the financial institutions that are online ready to get your business, you should definitely shop around for competitive interest rates and transfer your large credit card balances with high interest rates. Online businesses like www.loan reviewhq.com can review your financial situation and help you determine if they have services that are beneficial to your needs.
- Set Up an Emergency Fund
Financial guru Dave Ramsey suggests every household have an emergency fund set aside for unexpected events such as accidents, hospital visits or major home renovations that have to be made. He recommends a starter fund of $1,000, but ultimately you should work towards having three to six months’ worth of bills in a savings account.
- Pay Off Your Debt
Eliminating debt starts with a plan. Stop using your credit cards and only buy things if you can pay cash for them. Check out online web sites like eBay and Declutter to see if you can sell any extra items you have laying around and use that income to apply towards your lowest debts, then start taking those monthly payments and apply them to your bigger debts. Eventually the positive spiral will result in a long-term debt solution.
Don’t Give Up – It’s a Process, Not a Miracle
Remember, you didn’t get into a load of stressful debt overnight, and your finances are likely not going to fix themselves that quickly either. Be consistent and dedicated in following these guidelines, and you will have control over your debt sooner than you think.