Wishing won’t make your finances better - but these 3 steps can
We’re already weeks into 2014 and before we know it we will be ringing in another ew Year. If you’re like most people, you have high hopes for the year, at least financially.
Over half of consumers (56%) who responded to a poll by the National Foundation for Credit Counseling (NFCC) in December 2013, for example, predicted that they would be in a better place financially at this time next year.
In another December 2013 survey by Credit.com, more than 40% of those surveyed say it is extremely likely they will be able to eliminate all of their credit card debt this year while another 27% say it is somewhat likely or moderately likely they will do so.
To reach a goal like getting out of debt, though, requires more than optimism. You’ve heard the adage: “A goal without a plan is just a wish.” If you expect to pay down debt, build better credit, or bolster your savings accounts, you need a solid plan for getting there. Here’s how:
Know What It Will Take. What’s the number one strategy used by people who have dug out of credit card debt in the past? Implementing a budget, according to the Credit.com study mentioned above. A budget will show you how much money you have coming in and going out, and allows you to figure out how much you can put toward debt or your savings goal. (If you can’t seem to get one together, check out the free resource listed later in this article.)
Is It a Sprint or Marathon? If your debt or savings goal is fairly small, you may decide to go all out to reach it as quickly as possible.
That might mean reining in all non-essential spending for a few months, for example, or selling household items you don’t need any more to bring in some quick cash.
But if you have a large amount of debt, or if your budget is really tight, you may have to treat it more like a marathon. For many people, a realistic time frame to pay off credit card balances is three years.
In fact, on your monthly statements you’ll see exactly how much you need to pay each month to pay off your balance in 36 months. Set up automatic payments for that amount each month, stop charging new purchases, and you will know exactly when you will be able to retire that balance.
If you are trying to increase your savings, figure out how much you want to save monthly and have that amount automatically transferred each month from your checking account into savings.
Or, if your employer allows it, set up direct deposit from part of your paycheck into a savings account. After a little while, you won’t miss it.
Create a Support System. Change can be hard, and to be successful, it helps to surround yourself with people who share your goal and will cheer you on. But let’s face it: most of us aren’t exactly eager to talk about our debt with our friends or coworkers. That’s where a credit counselor can help. They can help you create a realistic budget, and even help you work out an affordable payment plan if necessary. And best of all, their advice is confidential.
Union members are eligible for a free budget analysis session through Money Management International (MMI), a non-profit, accredited counseling agency. Request a session online or call experienced credit counselors 24/7 at 1-877-833-1745. If you and your counselor decide a Debt Management Plan is appropriate, you will be eligible to have DMP fees reimbursed after successfully completing 12 months of the plan (union members only).