You had fun in your 20’s. You took advantage of being able to rock leather pants, traveling across the country in a van, and taking out loans for all your big dreams. Don’t get me wrong, there’s nothing wrong with that. Living the financially care-free life was well and good until you met her—the one you just can’t take home to mother: debt.
Introducing your biggest stalker
She saw you from a mile away and now she just can’t take her eyes off you. She knows your birthday, your credit score, and for goodness sakes, she follows you practically everywhere you go. It was nothing to worry about for a night or two; she was harmless until people started associating you two together. But, it’s been years, and now it’s time to shake her off your back. And the only way to get rid of debt is to manage it.
Set things straight with your finances this year by kicking your debt to the curb. How, you ask?
Start managing your debt with these 5 tips:
1. Know the Who and the How Much
Pulling the blinds on debt every time she looked through your window seemed to work for a while. But, now is the time to stop losing sight of her. Once you decide to break up with debt, your first task is to figure out who you owe and how much you owe them. Create a list that organizes your finances by including your debt, the creditor, the amount you pay monthly, and the payment’s due date. Then, decide which debt to pay off first. But, don’t stop there. Keep up regularly with this list. Update it every time you make a new payment so you can keep your debt in track. Remember, in this relationship you always want the upper-hand. So, stalking debt more than she stalks you lets you see her every move before she makes it.
2. Be Strategic
Once you figure out the who and the how much, it’s time to get strategic. The greatest turn-off to debt is giving your bills the attention they deserve. The greatest turn-on to your bills? Timeliness. Make sure that you are paying each bill on time. Late payments mean late fees, which just worsen your debt. Figure out which bills need to be paid and at what time during the month. Then, record the dates on a payment calendar. Taking the time to do these steps ensures that your bills are never late and that your debt gives you the space you and your bills need to live harmoniously.
3. Maximize the Minimum
Paying the minimum is sort of like pretending your groupie isn’t camping out on your lawn. It doesn’t hurt anything, but it doesn’t actually solve the problem. But, it’s time to take it to the next step and turn on the sprinklers. In other words, move away from just paying the minimum. Only paying 2 or 3 percent of your outstanding balance doesn’t make a lot of progress, and really only prolongs your debt. Instead, start maximizing your payment commitment. For example: pay weekly instead of monthly, pay double your minimum, make early or multiple payments at a time. Taking these steps will reduce interest rates and speed up your pay-back process. Soon, your financial record will be as clean as your lawn.
4. Notice the Little Things
Okay, so you called her cute once. Didn’t mean anything, right? Wrong. Your debt groupie has documented that moment and held on tight ever since it happened. Often times, the little things you spend money on are just adding to the big problem. Start noticing areas where spending is extraneous. For example, if you realize you spend a lot of money on lunches out of the office or drink $5 lattes at Starbucks each morning, it might be time to start cutting back. Also, when is the last time you checked to ensure you’re not being charged for automated renewal subscriptions for services you probably forgot you signed up for in the first place? Watch your bank statements for those sneaky charges. By reducing the amount you spend on the little things, you are able to better attack the big problem.
5. If You’re Gonna Kick it, Don’t Create it
If you’re going to break things off with debt, then you should probably stop spending so much time with her best friends: credit cards. Yeah, they’re cool and all, but in the end, you’re just using them to get closer to her. If you find yourself paying for things regularly with credit cards, it’s best to prevent yourself from getting tempted by them. Try using cash as much as possible and limiting your credit card use—at least until you get your finances in order or unless you’re able to pay it off in full each month. Using the cash you have at hand lets you better gauge how much money you’re spending at a time. The limit is more apparent, which makes overspending nearly impossible.
Your relationship with your debt groupie is past its prime—kind of like your relationship with the leather pants. It’s time to take charge and turn over a new leaf by managing your debt. Have the conversation you’ve always wanted to have, but debt has never wanted to hear: “Debt, it was fun for a while, but I’m moving on.” Starting with these 5 tips will get you on your way to a debt-free life. And won’t that be nice? Finally, some financial peace of mind.
Kathryn Esper is a marketing writer at Factor Finders, LLC. Factor Finders provides accounts receivable factoring services to help business owners secure the cash flow they need, without adding more debt to their balance sheet.
