Six Financial Goals to Help You Pay off Your Debt in 2015
Any kind of debt will have someone feeling as if their life revolves around harassing phone calls, making payments, and worrying about the future. Debt in any amount can be overwhelming, but there are solutions out there for those that are ready to move forward financially. If you are ready to finally be debt-free by the end of 2015, take a look at these simple goals and tips that may help to get you there.
Rank Your Current Debt
The average household in America has over $225,000 worth of debt, but debt doesn’t affect every family the same. The first step in eliminating all debt is to begin ranking the various forms of debt by its total amount and the interest rate. Any extra money at the end of the month should be used on the debt with the highest interest rate in order to cut the overall amount paid back. This is called the stacking method and has been used by countless individuals to help lower their monthly payments for credit cards, loans, and other financial obligations.
Lock in Low Interest Rates
For any debt with an extremely low interest rate, it is important to lock in these rates if at all possible. Depending on the type of debt, some interest rates can go as low as 1 percent, and this can result in quite a bit of saved money if it is locked in for a long period. Preferably, interest rates should remain static for five years or longer, but some institutions may offer a locked interest rate through 2015 which will give you time to catch up.
Transfer High Interest Debt if Possible
If there is any type of debt that has a particularly high interest and the company is not offering lower terms, it will be worthwhile to look into transferring the debt over to a lower interest credit card or account. Much like consolidating a debt, transferring high interest loans or other forms of debt into a low interest account could save thousands over the years and will simplify monthly payments. One of the best options is to go through a credit union that often offers potential members low interest rates to transfer their balance over.
Take a Fresh Look at Your Savings Account
No one wants to pull their hard-earned money out of their savings account, but eliminating current debt will make more financial sense in most situations. If an individual has an average interest rate of 12 percent on their debt, their savings account will have to have annual earnings of 18 percent or more in order to equal the outflow of money after taxes. At the very least, it is important to lower payments into the savings plan or put a halt to payments completely until the debt has been reduced.
Borrow against Your Life Insurance
If you have a life insurance policy with a cash value, it may be time to consider borrowing against the policy in order to pay off high interest debt. Many life insurance policies allow the policyholder to “borrow” some or all of the money with relatively low interest rates. If this is done it is important to remember to pay back into the policy as soon as possible or the amount borrowed will be removed from the face value of the coverage in the event that you pass away.
Reward Your Progress
Those that are taking action to pay off their debt are helping themselves avoid the 1.5 million bankruptcies that are filed every single year. This in itself is a cause for celebration and it is important to reward any progress that is made. Celebrating milestones such as paying off certain high interest loans with an affordable meal out or a weekend camping trip is a great way to improve your motivation and morale throughout this lengthy process. However, don’t allow your reward system to get you further into debt—small rewards will help you to keep going without being counterintuitive.
Between student loans, medical bills, credit cards, car loans, and home loans, almost everyone is going to find themselves weighed down with debt at some point in their life. Owing money can become a stressful burden that will affect everything from personal relationships to one’s career, and this is why 2015 is the year that you should begin taking steps towards drastically reducing or removing your debt altogether. The information for this article was provided by the professionals at Power Finance Texas in Dallas, who specialize in payday advance services.
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Category: Debt
Set up such financial goals that must be realistic and attainable. Also you will never succeed if you don’t set deadlines for achieving your goals. Measure it from time to time and specify details.
Agreed. Setting up goals are important. But be careful the goals are attainable. Folks set up goals that are out of reach. Start with small easily attainable ones for that quick win and ego boost.