Would you like to reduce debt this year? Who doesn’t! The New Year seems like the perfect time to set resolutions that’ll encourage us to improve our financial situation. In fact, it’s revealed that 51% of Americans plan to make money resolutions for 2021. Most of these involve paying off debts, improving credit scores, and increasing savings.
With the amount of debt that we have accumulated in the past year because of the pandemic and recession, this is not really surprising anymore. Even those who have sufficient emergency funds have probably depleted it already. So you can’t really blame anyone for their debt situation at this point. We’ve gone through one devastating event after another. It’s bound to push us into debt.
The thing is, regardless of how you got into debt, you have to pay it off. It’s your responsibility to do that. Fortunately, there are different ways to make your debt payments easier to meet. All it takes is to make a commitment to reduce debt so it’s more affordable.
To make it easier, turn your debt relief efforts into a resolution. It makes things more challenging and if you take it seriously enough, you might be able to improve the way you manage your finances in general.
3 resolutions that can reduce debt
If you take the time to do your research, you’ll find that there are many tools to help solve your debt problems. It’ll make things easier for you to manage and monitor the progress of your debt payments. A lot of these tools will even help you reduce debt.
But if you really want to keep your debts from becoming a threat to your finances, you need to develop the right habits. It’s not enough that you earn the money to pay off your debts. There are habits that will make sure your debts won’t be a threat to your finances again.
So if you have yet to set your New Year’s resolutions, here are three that you can use to help reduce your debts.
Cut back on spending
Most of the time, people get into trouble with their finances because of their spending habits. They tend to spend beyond their means. And if you scrutinize what they’re spending on, it’s usually a lot of unnecessary expenses.
If you really want to reduce debt, you have to make sure you cut it from the source. Minimize the need to use credit by cutting back on some of your expenses. Take a look at your budget plan and scrutinize every single expense that you’re making. Do you really need all of this right now? If not, you can choose to stop spending on these so you can use the extra money to add to your debt payments.
In case you use credit to pay for some of your expenses, these will really have to stop. It makes sense to stop adding to the debt that you want to reduce.
Prioritize debt payments
Another resolution that you can use to reduce debt is to prioritize your monthly payments. After all, it’s not just debt that you have to pay for. There are also bills and other expenses that need to be paid to help you survive. These include food, groceries, and utility bills – among others.
You have to make sure that your debt payments will be among your priorities. Make sure you can always make timely credit card payments. If you are late, that will make your balance grow because of the penalties and charges. So it’s better to secure your payments and make sure you won’t miss out on one.
The great thing about this is you’ll get used to scrutinizing your payments and making smart choices about where you’ll put your money. It’s a great habit that you should develop to help you manage your finances properly.
The last resolution that will help you reduce debt is to start saving more. The whole purpose is to increase your debt payments. How can you save more? After you’ve cut back on your spending, you can take a look at all the other expenses made.
What about the necessities? Can you lower these expenses further? Like for your food, groceries, and other necessities. Is there a way to keep these expenses down? Maybe if you cook more instead of ordering take out you can save more. There are many ways for you to save money. Every small amount you save can be added to your debt payments so you can lower your balance faster.
Why you need to reduce debt
Without a doubt, debt reduction will require you to make sacrifices. You’ll have to change a lot – specifically when it comes to your lifestyle. You have to restrict your spending – and that can keep you from enjoying the thing that you used to do. It may even be possible for you to delay some of your financial goals.
Is it all worth it? Yes, it is! There are three reasons why making all of these sacrifices is justified.
Improve the financial situation
According to reports, 72% of Americans feel confident that they can improve their financial position in 2021. If that’s also what you want to happen, you have to do something about your debts.
We all know that getting rid of debt will improve your financial situation. That’s one of the main reasons why you should reduce debt. Instead of paying your debts, you can put that money on something else. Like maybe you can use it to invest in a passive income source. You can also use it to boost your emergency funds. There are so many ways for this money to be used to improve your finances. Having extra money to spend on it will help you achieve it faster.
Stress is a common problem when you are burdened with debt. In fact, people have admitted to feeling high levels of anxiety and stress because of their debt situation. It gets worse if you know that you have limited finances.
The more stress you feel, the more dangerous it can be. It can lead to a lot of problems – like health issues. It can also put a strain on your relationships.
If you want to be free from stress, you have to get rid of your debts. Find a way to reduce it so you can completely pay it off faster.
Finally, debt reduction will help you save more money. Imagine the amount you waste paying the interest on your debts. Especially if you mostly have high-interest rate credit card debts. If you can remove that, all the money you paid towards the interest will now be freed. You can use it on something else. You can increase your savings so you can fund other goals that you have in your life. These include your retirement, a vacation with loved ones, and maybe a new business that can increase your net worth.