Starting the new year off in debt isn’t ideal, but it’s a reality for millions. Though there is more than one reason for going into debt —whether it’s school loans, credit card debt, or unexpected emergencies — it’s important to get ahold of your finances so you can do more with your money throughout the year.
With the right strategies in place and a strong mindset, anyone can transform their financial situation and enjoy their money throughout the year. That’s why we’re offering our tips for managing your debt in 2021.
Create a Finish Line
Setting a time limit is important when you have debt to pay down because it gives you a measurable goal to work towards. When you have a realistic date in mind, you can begin to organize your budget and decide what your monthly payoff will be.
Ideally, you’ll want to take your final number and break it down based on your income and what you can realistically afford to pay to reach your desired timeline. As long as you’re accountable, you can seamlessly reach your goal.
Look for Additional Employment
Depending on your situation, getting a second job may be a necessary action to close the gap. If your budget doesn’t allow for further spending cuts, picking up part-time employment could help you pay down your loans and reach that debt-free timeline you gave yourself. This measure would likely be temporary, depending on the amount of debt owed.
If you regularly borrow money online at GoDay or a similar lender, adding extra income will not only help you come tax season but will help you pay back those short-term payments quicker. Everything you bring home will be 100 percent yours, putting you in the position to pay down that debt.
Try the Snowball Method
If you’re able to pay more than the minimum on your credit card or other debts, there is a trick called The Snowball Method thatmight be exactly what you need. You’ll want to list all of your debts from the smallest to the largest balance. All of your excess money should go directly to those smaller payments, while you continue to make the minimum monthly payments on the larger loans.
When the smallest debt has been paid off, you would then move your extra money to the next balance — repeating this pattern until you’ve reached your largest loan. This method creates a positive mindset — tallying up one win at a time until you’re only left with the final payments.
Avoid Old Patterns
Now that you’re on your way to becoming debt-free, you must begin building an emergency fund. This will help you avoid falling into the same patterns in the coming years. When it comes to savings, it’s recommended that you have at least three-to-six months set aside.
Once you have built this nest egg, any additional funds should be put towards any investments you currently have. If you’re new to investing, be sure to do some research or work with a financial advisor. With the appropriate research, you’ll be able to spread your money wisely and set yourself up for sustainable financial success.
Every financial situation is unique. Finding the tools and strategy that works for you will likely take time — but with patience and a clear goal in mind you can tackle your debts with confidence and usher in a new year with a stronger financial understanding.