Seemingly, one of the hardest tasks to accomplish when there’s a need to put your financial world in order, is getting started.
It’s much too common that people will continually make excuses and procrastinate when it comes to finances. This is especially true for those in the greatest need of doing so.
Sometimes this is caused by depression about the current financial situations, and other times people just choose to ignore the money problems in hopes that they will just go away.
No matter the reason, delaying the sometimes hard decisions regarding finances and debt will only compound the problem, making it much worse in the end.
Whether you are current behind on bills, living paycheck to paycheck, or just have the desire to increase your savings, you must realize that no positive results will occur until you focus on your specific financial issue(s).
Make the decision to bring about positive change, then:
Just Do It.
Once you’ve convinced yourself to pay off your debt - you’ve cut spending and you’ve reviewed your budget, which debt do you begin with?
It’s always best to focus on one debt at a time. Plan to pay the minimum amount due on all forms of debt. And, always pay those minimum amounts on time. Paying even one day late will, in most cases, will subject you to late fees, which is just more debt that you’ll need to pay back.
Now, decide on which ONE debt you’ll pay off first.
This can vary from one situation to another, depending upon your specific needs. If you have a car that’s about to be repossessed, for example, or electricity which is about to be shut off, those will be your first priorities.
However, once you’ve moved beyond the “urgent” debts, credit cards are the most common choice for pay offs, due to their higher interest rates.
The choice of which credit card to pay off first is up to you. There are two common choices, and either can be the “right” choice.
First, you might choose to pay off the card with the highest interest rate. This makes sense because, in the long run, you’ll save the most money.
However, many choose to pay off their small balances first - regardless of the interest rates. This is a favorite method since it provides the positive feedback of actually seeing accounts being paid off. This not only will free up more money to pay other debts with, but further motivates you because each paid off account is one less that you’ll need to focus on.
What’s the very first step in creating a stable financial future?
Pay your debt.
Seems simple. But, there’s a little more to it than that.
It’s true that paying your debt should be considered an investment with a guaranteed return on investment. After all, if you’re paying down the balance on a credit card with a 15% APR, you’re essentially enjoying a return better than most any common investment would provide – mutual funds and stocks included.
But, there’s one more important part of this equation… Savings.
While paying your current debt should remain at the top of the priority list, you should be adding funds to a savings account concurrently, if even a small amount.
By adding to a savings account, not only are you building upon a good habit, you’re creating a bit of an insurance policy against future debt.
The money allocated to the savings account should be small in comparison to the amount used to pay debt, but it should not be neglected. Increase the amount to savings as the debt owed decreases.