Understanding that your mountains of debt didn’t happen overnight and that there’s no instant fix are the first steps to digging your way out of debt if you are drowning in it. Repairing credit and plowing out require work, discipline, and patience.
Local nonprofit organizations and credit counselors are available if you need outside help learning how to begin and how to pay. Working with credit counselors can reflect positively on your credit report if they succeed in having your payment schedules modified. For many people, taking an honest look at their situation and creating a plan is the place to start.
Let’s get to work by looking at a few initial steps to start your debt reduction. These are important, but certainly not inclusive.
8 Ways To Improve Your Financial History and Future:
Learn your Credit Score
This step will help you see where you are and whether your spending habits have impacted your credit score. If you are current on your bills, great, but if you meet, exceed, or are using too much of the the credit limit on your cards, your score will reflect that too!
What’s your total debt?
Often people recognize financial problems, but don’t know the true extent of debt. Pull together the information for every single credit card, every loan paper, every bill any money you owe.
Create a Chart
Make a chart that lists every debt you owe. This will give you an accurate picture of the bills. In the chart, create 7 columns with these headings: ITEM, LENDER, $ OWED, Minimum Monthly $, Interest Rate, DUE DATE, MONTHS BEHIND. you can also use the list to track any new purchases you add to your cards.
Americans spend money senselessly. How do you spend your money? Coffees, bottled water, convenience store snacks? Write down your spending daily. You may find areas where you can cut down. You will certainly think twice about whether you need that $5 Starbucks drink when a $1.85 regular coffee would do.
It’s time to stop the mindless spending. Review how or what you can do without. Make conscious purchases by creating a list and adding what you want to buy to the list. Carry only a small amount of cash it alleviates the temptation to spend what you don’t have. If you know the car needs gas, take extra cash for the gas. Spend it only for gas.
Start to develop habit forming steps realize, at the end of the day when you write down every penny spent, how this purchase might affect your state of mind. Good habits are contagious. As an aside, if you regularly use your debit card to buy gas or pay for other purchases, great – but this is not a license to spend. Remind yourself how much you can spend each day and stick with it.
Monthly Spending Plan
Develop a monthly plan, a new one each month. Of course you need a longer-term plan, but things change. December has holiday expenses; in January, you know you will have to pay annual life insurance premiums; in April, you will have to prepay the kids summer camp, etc. The beauty of the plan is seeing the incremental improvements, and where you can cut those are habit forming steps. This plan should also include prioritizing debt repayment.
If you’ve not received a raise in a while, ask for one. Even in this economy, you might be successful if you have taken on more duties as the work force has been cut. Or ask for extra work that is reimbursed. Moonlight! Many companies have announced increased online hiring this holiday season, plus there are many online job opportunities these days. Have a garage sale for things that haven’t been used in a year or more. Sell something of high value that you could part with. Brainstorm with your family for more ideas.
No doubt this is the furthest thing from your mind. As you pay down debt and feel a little weight lifted, put a small amount in savings weekly. Continue to whittle away the bills, but watch that small savings grow. Needless to say, if the steps you have put in place are not working, you may need to seek outside help. There is no shame in this. Certainly, if you have lost your job or your situation has changed, it is important to do whatever you need to do to stabilize your situation.