With the holidays now a rapidly fading memory, millions of Americans are now facing up to the reality of debt in 2014. Whether incurred over the holiday season, or long-term debt on credit cards or overdrafts, paying down debt is a milestone many people are becoming increasingly determined to achieve.
In the spirit of resolutions and new starts, people from all walks of life are assessing their finances at the start of the new year, in order to establish the most effective plans and strategies for becoming better off in 2014. Paying down debt is a significant starting point, and people should strive to find as many ways as possible of paying off their existing obligations. But when it comes to paying the debt down, what are the most cost-effective ways of realizing this goal? Before you can start paying down different debts, it is important to take stock of how much you owe, to whom, and how much it is costing you to repay at the moment.
Track all of this data in a spreadsheet – this allows you to make calculations on the fly, as you track your data, while helping keep all the vital information separate and accessible for the purposes of drawing up your plans.
Work out the most expensive debt, and start by paying that down first. What are the real killer debts for your circumstances? Invariably this will be credit cards, which often carry the highest rates of interest. Pay these high interest borrowings off first, before moving to other forms of finance, to save yourself money both now and long-term. At the end of every month, you should look to pay as much as you can afford, and always more than the minimum repayment if you want to actually tackle your outstanding capital.
A budget is an effective tool here, helping you work out how much disposable income your household has to play with each month. Even business executives like Mark Weinberger Global Chairman of E&Y use personal and professional budgets to retain control.
While it is OK to spend some of your disposable income on yourself, using as much as possible to pay down your debt will enable you to achieve financial freedom much more quickly. For a couple of months
of sacrifice, it is better to pay off a chunk of the debt than to live more comfortably by just paying off the minimum on a monthly basis.
Debt is a reality for a majority of Americans. Whether it is a mortgage on their home, a car loan, or simply credit card spending, people everywhere are now looking for effective ways to pay these debts down and better structure their finances for the future. By paying down the most expensive debts first, and paying as much as you can afford toward reducing the capital you owe, achieving financial freedom in 2014 becomes even more viable.
With the right attitude, and a determination to succeed, it can be possible to tackle any amount of outstanding debt in 2014 with a view to having a more financially prosperous year.