New Year’s Eve is right around the corner, and although our celebrations may look a little different this year, there’s one aspect to ringing in the new year that hasn’t changed: the desire to set forth new goals and become better versions of ourselves.
Next to losing weight and exercising more, Americans cite saving money and paying off debt as top resolutions for the year. While taking control of your finances can be a challenge is never easy, we are here to help you get the best start to your debt-free journey. By following the 5 steps below, you’ll be well on your way to making 2021 the year you take control of your finances!
Step 1 – Understand your Debt
One of the first and most important steps to take in your financial journey is to fully understand your debt. Often when we’re drowning in debt, we’re tempted to completely ignore the reality of our situation.
But to be successful, you have to be honest with yourself, which means facing your debts head-on. To do this, start by noting all of your outstanding balances—regardless of the amount. Include all relevant details such as to whom the debt is owed and the associated interest rate.
Once you have a clear picture of what you owe and to whom, you can prioritize which balances you should tackle first.
Step 2 – Determine Your Financial Resources
Once you’ve identified how much debt you owe, the next step is to determine your current resources for paying off those balances by conducting a personal cash flow analysis.
Start by adding up your net income from all reliable sources, including side gigs or freelance work, and noting when you receive them over the course of a month. Then compare your net income to your current monthly expenses, bills, and debt payments, while also including when they typically occur or are due. For expenses that tend to fluctuate, such as groceries and transportation, simply calculate the average of what you have spent over the last three months.
Reviewing your cash flow will allow you to track how much money you have coming in, going out, and if you have any opportunities to make adjustments.
Step 3 – Reduce Your Spending
When you’re paying off debt, one of the best ways to help your financial situation is to reduce spending wherever you can. Of course, you likely won’t be able to reduce monthly bills such as housing or most utilities as those are largely predetermined obligations. Still, there are other discretionary areas that you can focus on instead.
For instance, opting to prepare your own meals at home more often can easily save you hundreds of dollars a month. Another idea could be to challenge yourself to a no-spend week. It may seem hard at first, but you might be pleasantly surprised to learn what you’re capable of going without. The trick is to look for all the little ways in which you can save. Because, at the end of the day, it’s the little things that make that biggest difference in your budget.
Step 4 – Pay Back More Where You Can
Now that you’ve gotten into the habit of reducing your spending, the next step is to spend more. That’s right; we want you to spend more money—on your debt, that is.
To effectively pay off debt, you have to make more than the minimum payment every month on the balances you owe. Not only will you pay off your balances faster that way, but you’ll lower your credit utilization rate and save money on interest charges.
Step 5 – Find a Trusted Financial Partner
Is managing debt on your own causing you stress and anxiety? It may be time to seek professional guidance.
Working with a trusted debt relief company such as ACCS can be an excellent way to achieve your financial goals. Our professional debt specialists have years of experience helping thousands of individuals struggling to pay off their debt reach financial freedom. You can feel confident that the guidance and support you’ll receive will help you succeed.
Ready to take that next step? Request a Custom Debt Plan from ACCS. With no cost or obligation, you’ll be able to get a clear picture of your financial situation along with a tailored debt relief plan that’s right for you.