Wednesday, January 4, 2017

New Year, New You: How To Take Control Of Your Debt

It is surprisingly - perhaps almost frighteningly - easy to get into debt. Statistics show that 8 out of every 10 Americans are in debt of some kind. Some types of debt are helpful and can help you strengthen your overall financial position (such as mortgage debt), whereas other kinds can be extremely detrimental. Credit card debt is an example of a detrimental debt, as it racks up unnecessarily high fees and interest rates and lowers your credit score.

The New Year is the start of a new chapter. If you are buried under multiple types of detrimental debt (or even if you are only saddled with one kind), it's time to make a plan of action for getting out from underneath it. First Bank of the Lake is here to help you devise a strategy to help you succeed.

Stop Building More Debt
This may seem a bit obvious, but it's the first (and possibly the most important) step you can take. Avoid taking out new loans for big-ticket items for the time being. If credit cards are a problem, switch to paying with cash so you can avoid racking up more debt.

Make A List Of Your Current Debts
The next step is to make a comprehensive list of your current debts. Rather than looking at the total outstanding balances, arrange them in order of the highest interest rate to the lowest. Dedicate your full attention to paying off the debt with the highest interest rate first (though you should still make payments on your other debts in the meantime). Once high-interest debt is satisfied, you can begin putting that extra money towards the debt with the second-highest interest rate.

Build A Budget
Next, it's important to get an accurate understanding of where your money is going. For one month, keep track of every dollar you spend. At the end of the month, total your expenses and divide them into different categories so you can see where most of your spending takes place. This will allow you to see where you have room to cut back, which will give you more money to put towards your debts.

Don't Spend More Than You Earn
The other important benefit of tracking your monthly expenses is that it allows you to see how much you are spending in relation to how much you are earning on a month-to-month basis. If you are spending more than you're bringing in, it's time to change that pattern. Examine your budget carefully so you can determine where you can afford to cut back. Don't be afraid to be ruthless about it!

Boost Your Income
If necessary, you may want to consider options that would enable you to boost your income. If you are having trouble living within your means, you can consider taking a part-time job in addition to your primary position. If you receive money from an additional source, such as a gift or a tax refund, resist the temptation to spend it and instead put the funds towards paying off your debts.

Ask Your Creditors For Lower Interest Rates
If you have been making consistent payments on your debt, you may be able to negotiate lower interest rates with your creditors. They may be willing to negotiate with you if you have a good payment history. Getting a lower interest rate can make a huge difference in the long run - and it never hurts to ask!

Be Patient
Last but certainly not least, be patient with yourself and with the process. Getting out of debt cannot happen overnight. Don't expect to jump straight to the top of the mountain; go slow and take things one step at a time. You'll get there!

First Bank Of The Lake Is Here To Support You
Our local bank at the Lake of the Ozarks is here to encourage and support you along your journey towards a debt-free lifestyle. We offer a variety of services designed to help young adults make the most of their finances so they can be successful. Call us today to learn you can get rewarded for banking basics that you use everyday - ask about Kasasa Banking and how it can work for you!

Want More Awesome Finance Tips? Sign Up For Our Newsletter!

First Bank of the Lake - Striving For Excellence
Member FDIC. Equal Housing Lender.

Located at the entrance to the Osage Beach Premium Outlets!

4558 Osage Beach Parkway
Suite 100
Osage Beach, MO 65065

(573) 348-2265

No comments:

Post a Comment