This might seem like the worst time of year to think about finances. With presents to buy, food to stock up on and other festive treats to finance, things can quickly start to spiral out of control. Many of us spend much more than we can afford to, wanting to give our families the perfect holiday and end up starting the new year in debt. For some, this debt continues into the next year, and each Christmas is harder than the last.
That’s why this is the perfect time to think about improving your financial situation. Make it your resolution to fix your finances in 2018, so when it comes to Christmas shopping next year, you’re in a great position, debt free and with a little set aside to cover any extra costs. Here’s what you need to do.
Assess Your Current Position
The first thing you need to do is take a detailed look at your accounts. If you are in debt, stop ignoring them, they won’t go away on their own.
If you’re not in debt, look at your income and expenditure to see where you could start to make some savings.
Stop Paying the Minimum
We’ll assume from this point, that you are paying debts off. The first thing you need to do is stop paying the minimums. If you owe $3000 at 15% interest and pay off the minimum of 2.5%, it could end up taking you 25 years to pay off and costing you at least double in interest.
If your finances are tight, and you can’t afford much more, look at what you pay now. If you currently pay the minimum of around $50 a month, set up a standing order to pay off $55. Each month the minimum will reduce, as will the interest you are paying, but you’ll still be paying $55. Even this small increase could see you pay your debts off years sooner.
Pay the Highest Interest First
Many people are struggling with more than one debt. You may have loans, credit cards, overdrafts and store cards. In the ideal world, you’d take out a loan to consolidate your debts. But, unfortunately, this isn’t possible for many. If you’ve got a poor credit rating or low income, your chances of securing a large loan are low.
So, instead, make a focused effort to pay off the debt with the highest interest first. This is the one that’s costing you the most and will save you the most by getting rid of. Then, when this is gone, you free up more income to pay the others faster.
One of the best ways to fix your finances is by earning more money. If it’s possible for you to work overtime, or pitch for a promotion or pay rise, do it. But, if you are already working your hardest, that can be tough.
Instead, find other ways to make a side income. You could invest in the stock market, using thinkorswim or tastyworks to help make the most of even a small investment. You could make money online by taking surveys or testing websites. Or, you could set up a home business. Whatever extra you do earn, make sure it pays off some debt.
Take some steps now to get in control of your finances, before your debts start to control you.