When you have a lot of financial obligations, figuring out where the money will come from to pay down your debt can be difficult. Can you really build up your savings, fund retirement accounts, afford your monthly expenses, and have money left over to chip away at debt?
You can — with a little work. Here are three ways to get started.
Start by taking a hard look at where your money goes each month and make a list of all the things you pay for that you don’t actually use. Do you pay for more cell phone data than you use? You could downgrade to a more affordable plan. Have you been exercising outside a few months a year? Pause your gym membership during that span. Do your magazine subscriptions automatically renew and you never read any of them? It might be time to unsubscribe.
Next, look at what you spend on things you do use but might be able to cut back on — things like cable TV, that expensive garage parking spot (when you can park on the street for free), or your monthly habit of buying new clothes. If you can cut back on some luxuries, you could save a lot.
After you free up those much-needed funds comes the most important part: Set up an extra payment on your highest-interest-rate debt equal to the amount you’ve cut from your monthly budget.
If you’re having trouble keeping up on your minimum monthly payments, it might be worth looking into credit counseling. The National Foundation for Credit Counseling (NFCC) is a non-profit with trained debt counselors that may be able to help you negotiate lower interest rates and consolidate your debt into one monthly payment.
If you have equity in your home and a high credit score, you may qualify for a more attractive interest rate on your mortgage by refinancing your home.
If you are paying off student loans, you may want to consider refinancing them — especially if you can lower your interest rate. It’s possible that you could reduce the monthly payment on your student loans, which would allow you to focus on getting rid of other high-interest debt first, such as credit card debt.
Some people have also turned to car loans as another potential area for savings. Check the interest rate on your car loan and then shop around for a lower rate. Depending on how much you can reduce your interest rate, you might be able to shave time off your loan while keeping payments steady.
If you take the time to evaluate where your money goes each month and reallocate it even slightly, you can make a significant dent on your debt repayments. Paying off your debt is a huge accomplishment, and working to pay it off sooner could save you a considerable amount in interest.
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Disclaimer: Views expressed may not necessarily reflect those of Citizens Bank. The information contained herein is for informational purposes only as a service to the public, and is not legal advice or a substitute for legal counsel, nor does it constitute advertising or a solicitation. You should do your own research and/or contact your own legal or tax advisor for assistance with questions you may have on the information contained herein.