4 Swift Ways To Get Rid of Bad Debt
Have people ever really lived within their means? One thing we know for certain, is once we reach adulthood – life gets expensive. We need a home, things to put in our home, groceries, a cell phone, and the list goes on and on. It’s usually inevitable that once we finish school and go out into the real world, we’re already dealing with a substantial amount of debt. Fortunately, your bad debt can be manageable and tackled with some disciplinary tactics.
Credit card management
Credit card purchases and cash advances carry some of the steepest interest rates and fees around. With a national average of about 17.21% – getting on top of your credit card bill should be a priority. If you have already accumulated credit card debt – stop now. You need to find a way to control your usage and if cutting them up seems a little abrupt – try freezing them in a block of ice or giving them to a person you trust to hold them. Waiting for the card to defrost or waiting until you can redeem your card may have bought you some time to reconsider an unnecessary purchase.
Be reasonable with monthly payments
Your monthly budget should be in direct proportion with your monthly income. The 50/30/20 rule states that 50% of your after-tax income should be going towards your needs & debts. This means that buying a car or renting an apartment that is more than your monthly take home pay is not the wisest decision. When you make choices that are within your budget – your debt will reduce that much faster.
Spending money on takeout lunches, coffee and extras in a week can add up very quickly. It’s amazing how much money you could save by making your own coffee in the morning alone. On average, they say that Americans can spend upwards of $1000 on coffee in a year. Imagine being able to put that towards your debt? If you add lunch into the equation – you’re looking at a very easy way to lower your bad debt and fast.
Keep the momentum going
Becoming debt free is one thing. Becoming debt free and staying debt free is another. It’s a slippery slope when you have a credit card with a $0 balance, and some extra money in your checking’s account. Try and remind yourself that the high of paying off the debt in the first place is better than the high of making an unnecessary purchase. Build your savings and plan for your future. With sizeable savings, you could prepare for your next milestone and in the event of an emergency – have a financial safety net.
At Tobin & Collins, we are dedicated to help you meet all of your accounting service needs, including financial and business consulting. If you have questions about your financial situation – please contact us today!