The presents have been opened and put away, the tree and holiday decorations have been taken down or will be shortly, and the credit card bills start rolling in – UGH! No one wants to start the New Year off in a pile of debt, but it’s a pretty easy trap to fall into and it can be paralyzing!
How do you get back on track? Try these tips to help you get financially fit this year.
Identify the Cause. The first step in getting out from underneath your debt is to understand the cause. Is it JUST due to spending over the holidays or are there bigger underlying issues? Is it because you continuously spend more than your monthly income? Had an unforeseen emergency, or maybe your lifestyle doesn’t match your means? Make a list of all your current debt, monthly payments and your income. Once in writing it is easy to see the gaps. This part is never fun, but it is eye-opening. If you are serious about conquering your debt this is step #1!
Use credit wisely. If your credit cards are on the verge of being maxed out, put them away in a drawer so you don’t use them until you pay them down. Use cash as much as possible. Borrow only what you can afford to pay back and make sure you display a good payment behavior. When you use cash instead of credit, it is very easy to see how much you have and how much you can spend.
Control your spending. Easier said than done, but that’s where the debt came from. You have to control how your money is being spent by using a budget plan and creating a list of the things that you need before spending money on things that you want. Don’t forget to include an emergency fund for when the unexpected happens. Lastly, allow some “fun money”, it will make your budgeting adventure that much easier!
Negotiate with your creditors. This won’t work with all your lenders or creditors, and it can be intimidating, but ignoring their calls or letters won’t help either. Your creditor may be able to work with you help you with a payment plan that your finances can afford. If you have student loans, you may be able to apply for deferment or forbearance, so you can postpone payments without falling into default. The most important thing to remember is don’t ignore your creditors, they want to come to an equitable solution for everyone involved!
Follow an 10-10-80 rule. These numbers are an ideal, but can be adjusted as needed when you start out. The premise is that 10% of your income goes to charitable organizations, another 10% goes to personal savings, and the final 80% is used to pay for basic living expenses.
Get professional help. If your debt problems are really overwhelming, you may want to consider getting professional help. There are debt relief companies and credit counselors you can go to that can advise you of the best course to take. Everyone’s situation is different, so a customized plan that fits your financial needs can be created to help you pay back debt and avoid bankruptcy.
It can be easy to fall into debt, and it’s even easier to let that debt run out of control and overwhelm you. Everyone’s financial circumstances are unique, and while there are many solutions out there, there is no one-size-fits-all. Need help setting up a savings account or obtaining a personal loan to pay off or consolidate your debt – contact one of our branches today! We would love to be a part of your budgeting adventure in 2018!
Stephen Yonych Jr.
Assistant Vice President, Watertown Manager