2012 Money Resolutions: Cut Costs and Dissolve Debt
Start 2012 off on the right foot with a clear and concise financial plan. With holiday spending over, consumers must face the reality of what was spent. The stress of holiday overspending often leads to depression and anxiety. However, it is not how much a person owes, but how the debt affects them and what they do to correct the situation.
Someone could owe $1,000 and that could be a major burned to them whereas others may see that as a manageable amount of debt. People should seek help when they start feeling distressed. Whether a person needs to budget his way out of a $500 or $50,000 debt, there are ways to do it. So here are our tips for dissolving debt and cutting costs in 2012.
• Keep track of spending. To better handle frivolous spending, start by writing everything down. Then start cutting back on things that are not needed and start saving.
• Read all credit card statements. Make sure to read all the fine print in monthly statements. Pay close attention to see if creditors are changing the annual percentage rate (APR) to a variable rate or if they are raising rates. Pick up the phone and call credit card companies to find out if there are any changes coming.
• Pay off high interest rate debts first. The most efficient way to resolve debt is by paying down the highest interest rate balances first. Once the high-interest debt is paid, tackle the next highest, and so on. Remember, to continue paying the minimum due on all other debts.
• Watch borrowing. Borrowing against a home or a 401(k) to pay off debt may be convenient but it is also dangerous. People may lose their home or fall short of investing goals at retirement.
• Don’t be overly concerned with paying down mortgages. Mortgages tend to have lower interest rates compared to other debt. Focus on paying down other debt first. Many times people are able to deduct the interest they pay on the first $1 million of a mortgage loan.
• Revaluate insurance. The New Year is a great time to look and see if coverage is on target with current needs. Compare insurance prices with the existing policy to competitors. If the automobile and homeowner’s insurance policies are through different companies, look into combining for a multi-line discount.
• Get help if feeling overwhelmed. During the holidays, it’s easy to get caught up in the spirit of the season and spend beyond your means. If this happened to you, treat this as a learning experience and resolve to do better this year. If you need help, call Consolidated Credit at 1-800-728-3632 for free financial advice or visit ConsolidatedCredit.org.
Wishing you joy and prosperity in the New Year and beyond!