Sticking to your New Year’s Resolution can be extremely challenging no matter what the goal. Statistics indicate that nearly 4 out of 5 resolutions are busted within the second full week of the year.
One of the most popular New Year’s Resolutions every year is the goal of getting your personal finances under control and starting to paying off your debt. If being more responsible with money is one of your New Year’s Resolutions for 2012, I’ve put together the following guide to help get you started in managing your money better. I know they work because they are the same techniques my family used when we finally paid off a large amount of debt to become debt free (except the mortgage).
But don’t wait until to the new year to turn your financial life around, with nearly two months to go until January 1, 2012 (as of this writing), you can get a jump start now on your New Year’s Resolution to control your spending, pay off debt and build an emergency fund. There’s no time like the present to start building your way towards financial independence.
Step 1: Get A Copy of Your Free Credit Report:
One of the first places I recommend people to start when it comes to paying off their debt is to get a copy of their credit report. This will allow them to determine how much money they actually owe and who they owe it too. In my experience, most people don’t even know what the total combined balance is on all of their outstanding debts (this can be a real eye opener.
There are many companies that SAY they offer free credit reports but they usually involve signing up for monthly subscription fee for credit monitoring (or some other service that isn’t worthwhile). The only place where you can truly get a free copy of your credit report online is through the government mandated site www.annualcreditreport.com. I have written a step-by-step guide on obtaining your credit report this way here.
Step 2: List Out Your Monthly Bills and Other Expenses and Create a Budget:
Yes folks, you heard me right! If you truly want to get a firm grasp on your personal finances you need to do a written budget (at least for the first few months). Everything you ever wanted to know about creating a household budget that you, your spouse and your kids can live with can be found in my 6 part series on how to create an effective household budget.
Step 3: Start Paying Off Your Debt: An Easy Explanation of the Debt Snowball Payment Technique:
People ask me all the time how the debt snowball payment system works after learning about how my family and I paid off over $90,000 of debt in two years. By far, the debt snowball loan repayment technique is the easiest to use and most effective way to pay off your debt (no matter how much you owe). Simply explained, you pay the minimum payments on all your loan balances (credit cards, student loans, cars, mortgage, boat, etc.) and focus any money that you have left over at the end of the month (after doing your family budget) on ONLY one of those debts (usually the loans with the smallest balances first). For more information read my introduction to the debt snowball technique.
If the debt snowball technique is something you feel will work for you (and trust me, it will work for you if you give it an honest chance), I have created a DEBT SNOWBALL CALCULATOR tool in Excel that you can easily plug your debts into and it will tell you how long it will take before you are DEBT FREE!!!
Other Free Personal Finance Tools Help You Better Manage Your Money:
Free Excel Checkbook Registry
Free Excel Personal Finance Spreadsheet Software (this is based on the one I custom created for myself)
36 Ways to Reduce Your Home’s Energy Costs
Too Much Debt? Download our free Trees Full of Money Debt Snowball Calculator and see how quickly you can pay off your debt.