Financially stuck? Here are 6 options to pay off your debts and build wealth
Paid by Discover® Personal Loans:
Paying off debt can sometimes seem like an endless journey. Even when you pay bills each month, it may feel like the balance never really goes down. It may seem like the only way to pay off the balance is if something big, like a windfall or a raise, happens in your life.
But there are ways to pay down your balance and build wealth – no new jobs or side hustle required. Here are tips on how to break free financially and regain the stability needed to build wealth.
1. Identify lifestyle creep
In order to get where you want to be, you must first know where you are now. And that includes taking inventory of your current spending habits. A common cause of “missing money” is a phenomenon known as “lifestyle creep”. This is when, without you realizing it, your expenses increase over time. For example, maybe before the pandemic you only got takeout once a month. Now it’s more like once or twice a week. Although it’s quick and convenient, such habits can gradually disrupt your budget.
“The best way to avoid lifestyle drift is to set financial goals and then regularly check your spending and budget,” says Matt Lattman, vice president of Discover Personal Loans. “It helps you make sure you’re following your plan, adjusting if necessary and monitoring progress towards your goals. If it helps, create a ritual that works for you, like going out for coffee, so that once a month you set aside time and space to focus on your finances.
2. Set your financial goals
Next, determine what your goals are. Is it to pay off some credit cards or build up an emergency fund? From there, get specifics on how you might achieve those goals: by cutting an extra $100 each month from your budget, for example, or by saving a certain percentage of your salary. “You may already have long-term goals in mind, like saving for retirement or setting aside money each month for an emergency fund. Short-term goals are also important, like having enough for an extra dinner each month, being able to pay off debt sooner, or increasing your 401(k) contribution,” suggests Lattman.
Once you have your goals in mind, assess what you earn and what you owe. This will help you develop a specific plan to get where you want to be.
3. Assess interest on loans and credit cards
Money spent on interest means the money isn’t available for other things, like building up your savings. Lowering your interest rates can save you money over time. There are several options for reducing the amount you spend on interest. If you have a good relationship with your lender, you can start by simply asking them to consider lowering your interest rate. You can also explore options like a balance transfer with a low introductory interest rate.
Another option is Consolidate High Interest Credit Card Debt on a personal loan. A debt consolidation loan, like a Discover personal loan, gives you a lump sum that can be used to pay off higher interest loans directly.
“Because personal loans often have a lower interest rate than credit cards, they can help you devote more of your money to paying off your debt, saving you money. money on long-term interest,” says Lattman, adding that 86% of surveyed* debt consolidation customers said they saved money with a Discover personal loan, and the majority said saving an average of $440 per month. “It’s money you can use for other things, whether it’s increasing your emergency savings or doing something fun to reward your progress.”
4. Keep an eye on your credit score
When it comes to your financial health, it’s not just the money in your bank account that matters. Your credit rating is important, too much. A higher credit score can mean lower interest rates on things like car loans and mortgages, as well as personal loans and credit card offers. A high credit score can also give you more options, because a credit score is a factor lenders and landlords consider when evaluating whether to approve applications, Lattman says.
“Check it at least every few months,” he says. “If you’re working to improve your credit health, you might want to check in more often. Some banks, like Discover, offer their customers free tools that allow you to do this regularly and effortlessly. »
5. Make a date with money
Building your financial health is a process, and it helps to spend time on your calendar to focus on your budget and to assess your progress toward your future goals.
“The method that works best is the one that works for you,” Lattman says, adding that some people use apps, spreadsheets, or can discuss strategies with a friend for an added layer of accountability. “Whatever you do, plan it, practice it, and choose something that’s true to you and what you know you can do.
6. Celebrate small wins
Padding your budget to include party time can help you stay on track, suggests Lattman. Whether it’s going out to dinner or grabbing a coffee, having some leeway to enjoy life can help you stick to a realistic budget and celebrate financial gains, while continuing to work towards your goals. global financials. And then, if a windfall or promotion happens, you already have the financial skills in place to be able to maximize it.
From Discover® Personal Loans:
You can save hundreds or even thousands of dollars on interest when you pay off up to $35,000 in higher rate debt with a Discover personal loan. To estimate your savings, see The Discover Debt Consolidation Calculator and enter your outstandings. Discover charges no set-up fees and offers flexible refund terms so you can choose the option that’s right for you. Learn more about how Discover personal loans can help you achieve your financial goals.
Discover grants loans regardless of race, color, religion, national origin, gender, disability, or family status.
*About the survey: Figures are from an online customer survey conducted September 13-27, 2021. A total of 619 Discover personal loan debt consolidation customers were surveyed about their Discover personal loan most recent. All results @ a confidence level of 95%. Respondents opened their personal loan between January and July 2021 with the aim of consolidating their debts. Agree includes respondents who “Somewhat agree” and “Strongly agree”.
This article was paid for by Discover Personal Loans and created by Yahoo Creative Studios. Yahoo Finance editorial staff had no involvement in the creation of this content.