How to Clear Your Debts and Stay in the Black this Year

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Guest post by Andreas

Looking ahead to a better financial future is the goal of many individuals. A new year tends to make people take a good, hard look at their situation and make some decisions on what to change. A majority of people are looking to clear out their debts and stay in the black this year, stashing money away in a savings account.

 

To clear debts, extra money needs to be obtained. When a bill for a credit card or personal loan arrives in the mailbox, funds are necessary to make the minimum payment. Adding more money to each payment will just decrease the amount of time it will take to pay off the debt. This means making deposits into a savings account sooner than originally planned.

 

Use Money Wisely

The extra money has to come from somewhere. A windfall of cash isn’t necessarily going to happen. Start by making sure that all money is being spent wisely. Invest some time in checking out discounts for everything from your electric bill to your homeowner’s insurance. Both of these are a necessity, but there are ways to save money and ensure that the lowest price possible is being paid. Every cent saved can go directly to reduce debt or into a savings account.

 

Cut Back On Spending

Cutbacks are another efficient way to free up extra cash and get those bills taken care of promptly. Decreasing spending can happen in several areas of a person’s budget. Consider foregoing a meal out on the town for a quiet dinner at home. Skip a trip to the theater and opt for a movie rental instead.

 

Take the money saved and put it towards the debt. Cutting back on the amount paid for entertainment, groceries, or even clothing isn’t always easy. However, these changes make it easier to clear up debts and move on to a new financial situation. This includes the opportunity to open up a savings account and begin frequent deposits.

 

Protect Your New Financial Status

Paying off debt can be a thrilling experience. A person achieves a true sense of accomplishment and is able to see the financial changes for the better. The problem is that debt easily creeps back up. It always starts out small, but it takes very little for it to spiral out of control.

Protect finances from overwhelming debt by taking away opportunities for spending on credit. If a checking account previously had an overdraft option that was consistently being used, cancel it when it is paid off. It costs money each time the funds are taken from the overdraft account and it is an easy way to slip back into debt.

 

While canceling all credit cards isn’t a good idea, look into getting rid of accounts that are not beneficial. Credit cards obtained a long time ago that show most payments coming in on time could be beneficial. Cards for things like clothing stores are potentially less valuable and should be deactivated or closed. It takes away the temptation.

 

As debts are taken care of and more money is being accumulated, it is important to choose a savings account that will not only keep the funds safe, but also provide some rate of return. Research carefully and choose an account that fits into the overall financial plan. It is possible to clear out the debt and begin to save more money.

 The above was a guest post on behalf of Money Supermarket and was written by financial writer Andreas

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Category: Debt Freedom