With another holiday season in the books, many people end up with more debt than they would like. January is a good time to think about ways to manage debt and make resolutions to achieve financial stability.
We’ve pulled together 5 tips to help you get started:
Assess your debt.
The first step is to determine exactly how much debt you’ve amassed over the holiday season. Make sure you take all debt into consideration when you are going through this exercise.
Develop a budget
The next step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, list your fixed expenses – those that are the same each month –such as mortgage payments or rent, car payments and insurance premiums. Next, list the expenses that vary – such as entertainment, recreation and clothing.
Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses and determine how you can most effectively eliminate your debt.
By developing a budget you’ll be able to quickly tell how much debt you can pay off, while still making ends meet on the basics like housing, food, health care, insurance and education. You might, for example, realize that you can comfrtoable pay $250 off of your debt every month.
When reducing your debt, always continue to make your payments on time. Try to pay more than the minimum due. Generally, it is a good idea to pay off debt with highest interest rates first.
Contact your creditors.
Contact your creditors immediately if you’re having trouble making ends meet. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don’t wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.
Find free fun.
Give yourself the month of January to get your budget back on track. Plan to only spend money on necessities, and then commit to finding opportunities for free family fun. Plan a family game night, or check out books and movies from your local library. Your family might also enjoy preparing dinner together or volunteering for a local charity. If you enjoy outdoor fun, winter provides plenty of opportunities for sledding or building a snowman. Use your imagination, and the savings will add up!
Open a holiday savings account.
Saving a little money each month will help you avoid facing the same spending crunch in December 2012. Most banks enable you to set up automatic transfers on a regular basis that can help you save. MidWestOne ‘s Bank Your Change program is another example of how to making saving easier. Every time you make a purchase, the amount is rounded up to the next whole dollar and the difference is automatically deposited into your savings account.