Your financial moves will dictate whether you will find success in your finances or not. This is not something that you can leave up to luck. Every move, decision or choice that you will make should be done carefully. All it takes is one mistake to wipe out everything that you have worked so hard to build.
For instance, your seemingly innocent credit card purchases are now a huge debt burden that you have to pay off. You cannot ignore your debt situation because it has the power to compromise your financial stability. If you had plans for your future life, you can say goodbye to that. It will be hard to make the financial moves that will bring you closer to your dream life.
Fortunately, there are options for you to get out of debt. One of the most effective strategies to consider is debt consolidation. This involves restructuring your debts so you can simplify your repayment plan. This way, you only have one monthly payment. Thanks to this debt relief strategy, your credit obligations will not be as intimidating as it used to be. It will be easier to keep your stress levels low so you can focus on being proactive about your debts.
While choosing this option is a smart move, there are key ingredients that will really make debt consolidation successful. First of all, you need to make sure that you are making the right financial moves that will make the road towards debt relief easier. Not only that, you need to identify the moves that you need to postpone while you are in the midst of a debt consolidation program.
Postpone these financial moves while paying off debt
Let us start on the financial moves that you need to avoid while you are paying off your credit obligations through debt consolidation.
Starting a home renovation project
We all want to live comfortably. However, there are times when that costs us a lot of money – especially when it involves a home renovation project. If you are in the midst of a debt consolidation plan, you have to think twice before you proceed with this project. According to reports, a home improvement project costs an average of $7,560. Despite that amount, there is a 17% increase in home improvement projects over the last 12 months.
If you are thinking about getting your home renovated, think about it first. Can you really afford that additional expense if you are in in the midst of paying off your debts? If the house will not collapse on you, why not postpone it for now? Maybe after a few months, once you have paid off a significant part of your debts, you can think about this project. But for now, focus on paying off your debts first.
Making a deposit for a new car
Among the other financial moves that you can make, this is one of those that will really make you lose money. When you buy a car, the value of that vehicle is already depreciating once you drive off from the dealers. You are already losing money on that. And if you are in the midst of a debt consolidation program, you have to make sure that you are not wasting any money. So buying a new car is a big no-no for now. This is especially true if your debt situation gave you a bad credit score. This would have resulted in a higher than the usual interest rate on the car loan. Stick to your old car for a couple more months before you make a purchase.
Buying something new
Although we have singled out cars for its ability to depreciate quickly, the truth is, you should avoid buying new things in general. If you need new clothes, go to thrift shops to buy them. Save money by buying second hand. Or you can rent. If there is something that you possess that you want to replace, maybe you can postpone doing these financial moves for now. You want to conserve your financial resources because your priority right now is your debt consolidation payments.
If you really want to consolidate your debts effectively, you need to make sure that all your finances are being used wisely. There is no point in wasting it on expenses that you know you can delay. Once your debts are paid off, only then can you be free to pursue other financial moves that can improve and secure your personal finances for the future.
Financial moves you should do while consolidating debts
While there are financial moves that you should postpone while you are in the midst of a debt consolidation program, there are moves that you have to keep on doing. This might be hard to do especially if you have limited financial resources. But with a little bit of planning, it should be possible to accomplish these while you are paying off all your debts.
Keep paying your 401(k)
First of all, you have to make sure that you keep on contributing to your 401(k). According to reports, a lot of Americans are struggling to save for retirement. In fact, more than 2 out of 10 do not save any amount at all. This is a huge problem if you think about it. If you have it bad right now, you should wait until you retire. Not having funds might even keep you from retiring. You will have to work until you drop. So while you are paying your debts, keep contributing towards your retirement. This is the best way to reward yourself. Do not worry about contributing a small amount only. It will grow over time thanks to the compound interest.
Saving for an emergency fund
Another one of the important financial moves that you need to look into is saving for an emergency fund. When you have this fund, it will be easier for you to avoid debt. Sometimes, people land in debt because of unexpected expenses that they were not prepared for. Since it is usually an emergency, they rely on credit to make ends meet. If you have enough emergency fund, this does not have to be an issue. You do not have to add more debt to what you already owe.
Avoiding new credit card purchases
Finally, one of the smartest financial moves is to avoid new credit card purchases. No matter how tempting the expense may be, do not give in. do not use your credit cards because that will bring more trouble into your financial life. Keep a tight lid on your spending. When you have completed the debt consolidation program, you can start using credit once more. But all your financial moves from thereon should be smarter and done with a purpose. That way, you will no longer land in another difficult debt situation.