It’s 2020, so this should be the year that provides clarity for you to look at your personal finances with an eagle eye. Be honest with yourself, did the holidays cause you to go into debt? Because it’s a new start to the year, we want you to start the year strong and achieve financial stability before next December. Untangle yourself from all the debt you’ve accumulated over the years with these simple tips:

Cut up your credit cards immediately

The fourth biggest cause of debt (after student loans, auto, and homes) is credit card debt. Experts estimate that credit cards are responsible for 26.2 percent of total debt in the United States. Further statistics establish that the average credit cardholder has at least four credit cards.

Credit cards are handy in an emergency or to help establish cash flow during tight financial times. Yet, using credit cards as a crutch and digging yourself more into debt each month is not the financial future you want. Instead of purchasing items you cannot afford and paying absurd interest rates on your credit cards, get rid of them completely. Only keep one credit card for emergencies.

If you are deep in credit card debt, construct a repayment plan immediately. Credit card interest is crippling and can hurdle people quickly into debt. Use our credit card debt calculator to see how long it will take to pay off your credit card debt. Consider consulting with a banking expert to help you fine-tune a debt repayment plan that will work for you.

Pay more when you can

When it comes to paying off debt, it’s better to pay off more when we can. Whenever you borrow money there is interest tacked onto the original borrowed amount making it more expensive. To avoid paying an astronomical amount in interest fees, try to overpay on your debts each month. The amount you overpay will be put towards the principal of your loan, which will decrease the amount you owe in interest.

Budgeting

A proactive step to make sure that you stay out of debt, or do not get near it, is budgeting. A monthly budget is essential in maintaining a thriving household. Detailing exactly what you spent and on what will help you trim unnecessary expenses and paint a realistic picture of your current financial reality. A budget will also help you determine how much you can afford outside of the necessities. Don’t forget to factor repayment of debts into your budget as well. Also, try to factor in overpayments to pay off the debt sooner, saving you money in the long run.

This year is the year that you can become debt-free. Focus on these three small steps to help dwindle the amount of money you owe to others. The less debt you have, the more you can funnel into savings and create a brighter financial future for you and your family.

Kim Anderson Relationship Banker Supervisor 763.862.6500 KimAnderson@falconnational.com