Paying down debt and stacking some cash in a rainy day fund can seem like overwhelming task. After all, who enjoys creating a budget? Thankfully, this process can be made much easier with the help of a few quick and simple tips. Here are a few of my favorites…
1. Check your credit report
As you’d expect, your credit report will determine your credit score, which is essentially your financial lifeblood. Your credit score will determine whether or not lenders will approve you for loans (auto, home, etc). If approved, your score will dictate the interest rate your charged, with low scores often resulting in steep penalties and sky-high rates.
Consumers can check their credit report once per year, free of charge. Take advantage of this.
2. List out your debt (all of it!)
Paying off debt is a common goal, but in order to reach your end goal, you need to know your exact starting point. Once you know exactly how much you owe (plus your interest rate) you can figure out a plan to repay this debt as quickly as possible.
3. Pay more than the minimum on your credit card
Don’t get tricked into paying only your minimum payment. At the risk of sounding like a conspiracy theorist; this is what credit card companies want you to do!
Paying off high-interest credit cards takes years if you’re only making minimum payments — good for the credit card companies — very bad for the consumer. By the time you’ve finally paid off the card, you might have paid twice as much as what you originally borrowed.
4. Automate your savings
Having trouble saving money? If so, it might be best to save yourself from yourself.
Set up a direct deposit to a separate savings account. This way, every time you receive money, a portion will automatically be allocated to your savings account.
5. Perform your own financial “check-up”
When was the last time you went to the doctor for a check-up? Your financial health, like your physical health, needs to be evaluated every once in awhile.
Whether it’s preventative or to diagnose an issue, a check-up is necessary to have an awareness of where we stand and what adjustments we might need to make when it comes to spending and saving.
6. Never forget the Golden Rule
The golden rule of personal finance is to earn more than you spend. It’s simple in theory, but easier said than done.
If you’re looking to avoid heavy debt and achieve some sort of financial freedom this formula is incredibly important.