The first half of the year could have left you with a lot of debt under your name that is why you need to recover from debt before the year ends. There are a number of reasons why you might be in debt for the first half. You could be deep in credit card debt, you could have taken out a loan to start a business, or a big house repair could have put you in the red.
One thing you need to understand is that debt is not all that bad. There are a few of them that even helps you reach your goals in life. A student loan allows you the opportunity to take up higher education and pay for it after the fact. A mortgage loan will afford you that beautiful house you need for you and your family.
However, the problem starts when you begin to get behind on your payments. If you used your credit card to get out of a difficult situation, you need to make sure that you pay it off at the end of the month. This is important as Consumer Affairs share that for consumers with credit card debt, about 24% over $10,000. It could be a tall order considering that you are coming from a personal emergency but you need to pay it off. Otherwise, you might find yourself trying to recover from debt all over again.
It is a great objective to try and rise up from your debt before the year ends. Not only will your credit score get a good bump because of your timely payments, but you also get to face the holidays with a healthy budget. This also gives you the opportunity to start the new year on a high note bringing you much closer to your long-term goals. Here are a few things you can do to help you recover from the debt you incurred in the first half of the year.
Open your billing statements
If you plan to recover from debt, you need to know what you are up against and ignoring your billing statements will not help your cause. Even if you put them in a drawer or throw them out the trash, your lenders will still collect that money. To make matters worse, the habit of throwing away unopened billing statements opens you up to the possibility of identity fraud. This is because people can take that billing statement, filled with your personal details, and use it to open up credit under your name.
One thing to make it a little bit easier is to set aside a day to go over your statements. Go over that schedule month after month and make a habit out of it. Once you do, checking your statements will become second nature to you. It might even be a good idea to subscribe to online statements to help you become organized and lower the chances of misplacing your statement. This will also help you manage your money better.
Pay more than the minimum on your credit card bill
One of the5m best ways to help you recover from debt is to start paying more than the minimum on your credit card balance. Paying minimum helps you stay current on your payments which can be a positive development for your credit score. However, minimum credit card payments will bring you a lot of payment challenges.
Once you decide to send only the minimum payment, your lender can now start to add several fees on your account. This often results in a bigger payment every month which is more than the actual amount you used in your card. If left unchecked, it will take you a long time to pay off your card balance and you end up paying a lot on fees and interest.
The main goal when you use your card is to pay off the full amount every month. This allows you to take full advantage of your credit card. For one, this is a positive development for your credit score. It is because on-time payment is a big factor in computing for your score.
Save up for your emergency fund
It is a tough climb to try and recover from debt but if you do get over that challenge, you need to start saving for your emergency fund. One of the reasons why it is important to focus on rebuilding your reserve fund is to help you stay away from debt. If you any unexpected emergencies come up, you do not have to rely on your credit cards or taking out a quick loan just to get by.
Take for example a health emergency where you might find yourself having to undergo an operation and staying for an extended period of time in the hospital. Apart from the hospital bill that you have to worry about, you could be losing a lot of days off work that your salary could be affected. Once this happens, you could start to miss some of your payments.
Having an emergency fund helps you meet your financial obligations even if your salary cannot cover for everything. This is important because as you have recovered from debt, you might find yourself back in the red if you miss payments. Interest, fees, and other penalties could start adding up making the monthly payments harder and harder.
Find extra sources of income
One of the most effective strategies, when you want to recover from debt, is to look for opportunities to increase your income. This is as straightforward as a solution can get to help you get over your debt situation. If you are trying to find ways to bring in extra income every month, there are a number of options you can consider.
One is to figure out how you can increase your take-home pay from your current job. You can explore the possibility of asking for a pay raise to help you increase your income every month. Just be sure that you can defend your request. You need to back this up with proof that you have been contributing a lot to the company.
If this is not for you, one thing you can do is use your hobby to your advantage and earn money from it. This could take a little creativity on your part to find out how you can make money with it. If you love to bake, you can bake one weekend and sell it to friends or people in your area. There are people who need some repairs done at home so if you are handy and know your way around fixing broken items at home, you can make extra money and help other people in the process.
Have clear financial goals you want to achieve
You might not immediately see how defining your goals can help you recover from debt but it is a huge help. For one thing, having your goals in mind will keep you focused and keep you away from potential mistakes. Is your goal to be able to pay off your credit cards before the year ends, pay for the car in full, or even save for the holidays?
Have these goals in mind it can keep you from making mistakes. Before you even make that unnecessary purchase, think about what your goals are and it can help you walk a straight path. Weigh your decisions carefully putting a premium on the goals you want to achieve.
If you are able to recover from debt before the year ends, you set yourself up for a good start for the coming new year. It also allows you to enjoy the upcoming holidays better because your finances are in order.