Surely one of the biggest new year’s resolutions that will be wished this Saturday night. With four out of five people worried about their ability to make future debt repayments, according to recent surveys published in the Herald, debt is quite clearly on a lot of our minds. And if we’re happy enough to make mortgage repayments, we’re concerned about the economy at large at anxious to clear our consumer debts. If this is your new year’s resolution, here are a couple of things to think about.
What’s Your Total?
Before the year ticks over, you need to know how much you’re up for over the next twelve months. How much consumer debt do you owe, in total? Sit down and tally up everything. Without the big number, however terrifying it is, you won’t be able to start a serious schedule of getting yourself clear of consumer debt. It’s also necessary to note- if the number is really big, it’s not necessarily something that should be done within a year.
What you have now is an opportunity to completely reconfigure your finances and learn how to manage them sustainably. This means your repayments might have to be smaller than you would first have hoped. As long as you can maintain them, come rain, hail or shine, then it’s an effective schedule. The only caveat is that they’ll need to be over minimum repayments, else this could remain your resolution for many new years to come.
Decide On Your Approach
Do you want to pay the smallest balance of first and get the rush and reward of the first obstacle well and truly hurdled? Or do you want to attack the highest interest card and save money on interest charges in the future? Your approach is largely up to your financial personality- are you someone who needs rewards and to see results, or would you stay motivated in the knowledge that you’re saving money as you go?
Any approach that pays above the minimum and stays consistent is good, so work out which one suits your personality best and go from there.
Consider Your Options
Investigate a balance transfer, where you can consolidate all your debt onto the one card and pay no interest on the balance for the first six months. Credit cards are a pretty competitive market and there are lots of options out there at the moment. Using a bit of savviness could save you a lot of money in the end- and the breathing space that a balance transfer will give you could be the kickstart you need.
The other option is to consider applying for a personal loan to cover your credit card debt. It’s still a debt, but probably at a lower rate of interest and certainly at a steady rate of repayment.
Relearn Old Habits
Once upon a time, I would have written to throw the credit card in the bin. But that’s like pouring water on cigarettes- it works for the time being, but does nothing to stop you buying another pack. These days, I keep my credit card in my wallet.
In case of emergencies and to remind myself that my consumer debt was the result of my actions and decisions, and I have the control to not go there again.