Americans hold more than $1 trillion in credit card debt and over twice that much in loans, according to the Federal Reserve. After mortgages, student loans are the second largest source of debt, and auto loans aren’t far behind. It’s no wonder many Americans have almost nothing set aside for emergencies or retirement.
Fortunately, you don’t have to be part of this trend. One recent survey found that more than 25 percent of Americans are living debt-free. It’s not an impossible dream. Of course, getting there will take discipline and a specific strategy.
Following is a starter plan for getting out of debt once and for all:
Go to the websites of your lenders and card issuers. Identify your outstanding balances, interest rates and minimum monthly payments. Copy the information to a spreadsheet or piece of paper. Post the figures above your desk or on your refrigerator. Update the balances as they’re paid down.
Develop a strategy for liquidating those accounts. You might opt for paying off high-interest cards first or focus on balances you can get rid of quickly. Do whatever works to maintain momentum.
“Consider consolidating multiple debt liabilities into one credit facility.” – Rich Middleton, CPA
Summer’s here. Will you splurge for a tropical vacation using credit cards? Bolster your odds of becoming financially independent by paying cash or using debit cards, even if that means going with a cheaper option.
Make a concerted effort to build up a rainy-day fund with enough cash to cover at least three months of expenses. An emergency stash will help you steer clear of debt when the unexpected happens.
Besides loan and credit card payments, you need to buy groceries, put gas in the car and keep the electricity on. So it’s important to monitor cash flow. Understanding and documenting regular income and expenses can help you gauge progress toward your financial goals.
“When you get married, your spouse’s income will be considered as available to pay your student loans regardless of whether or not you have access to it. If you are comfortably on a income based repayment plan and get married, you should expect your payments to jump in the following year. ” – Chris Cicalese, CPA
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