With more online stores offering easy payments and affordable options, it can be enticing to take advantage. Some retailers will pull a soft credit score to ensure your credit worthy.
If you have good credit, this may be tempting. However, just because you can borrow money and make the easy payments, it doesn't mean you should.
Stick to a budget
Know your debt
Communicate with creditors
Build an emergency fund
If the COVID-19 response has proven anything during our times of staying at home, it is the importance of having an emergency fund. During this turmoil, more households are getting deeper into debt and stretching every dollar possible.
1. Stick to a Budget
Having the right plan in place can help you make smarter decisions and will allow you to become financially fit and ready to meet life's challenges.
Here are five tips to help you get out of debt while lowering your reliance on credit and put you on a path toward financial freedom.
Make a plan and stick with it. You’ve heard this over and over again…make a budget. Many do not want to be told what to do with their money. If you’re serious about getting out of debt and reaching real financial freedom, you’ll have to tell your money where to work for you.
Having a budget will help you to not spend money unless it's in the budget. Get a budget plan together to Assess, Avoid, and Attack any debt you have.
2. Know Your Debt
Here comes the fun part…ok, not really. You must review all your debt statements. From credit cards to bank loans, highlight your current balances, debt owed, interest rates and minimum payments due. From here you can create a plan to attack your debt, but only if you have the appropriate knowledge and tools to do it.
3. Communicate with Creditors
Next, determine if you use the debt payment strategy of debt snowball or debt stacking. For example, decide on a plan of attack by focusing on the highest interest rate debts first or the lowest debt balance first. Communicate with creditors if you are past due or are close to being past due on any bills.
4. Build an Emergency Fund
Getting out of debt is hard work. It can be difficult to imagine a life without bills if you’ve never experienced it. You’ve heard the wonderful stories that only dreams can dream. But, hard work pays off.
Get serious about getting out of debt. One great resource to avoid falling back into debt is by setting a goal to save $1,000 before paying off debt. It is commonly mentioned to set your ultimate goal of having three to six months' worth of living expenses available in savings in case of an emergency.
Find extra cash. Until your debt is paid down, money is going to continue getting tighter and you’ll find yourself squeezing every penny. Consider what services you can cancel or items you can sell. A penny earned can be a penny that fights debt. Put any extra cash toward your shrinking credit card bills or loans.
Get support. Digging out of debt can be a major undertaking and that may mean you need to enlist the help of others. Financial counselors at your military installation or organizations affiliated with the National Foundation for Credit Counseling may be able to help you get out of debt and stay on track.
You might also consider sharing your plans with a friend or family member and ask them to hold you accountable.