Making New Year’s resolutions can be challenging. Where do you start and what should it be about? Some popular resolutions revolve around finances – make more money, pay off the credit card, get out of debt, and another similar turn the corner ideas.
If you are struggling financially and worried about filing for bankruptcy, consider making a New Year’s resolution to help you take control of your debt.
Although when in doubt, there is your top bankruptcy attorney in Scottsdale, the lawyers do not always intend to file for bankruptcy for every client. Consider making some of the following financial resolutions to help you get on top of your debt.
Learn More About Finances
Make a New Year’s resolution to improve your financial literacy. The more you understand finances and how money, budgeting, investing, and debt work, the better off you can become.
The internet has tons of blogs that seek to help you take control of your finances. Browse through some that offer information to teach you about finances, rather than provide band-aid solutions to a single problem.
Start a Budget
If you are struggling with debt, you have likely heard the word budget from time to time. That is because a budget is one of the best ways to give you a snapshot of your actual financial situation. A budget shows you how much money you bring in each month and where you are spending it all each month.
To start a budget, write down your total monthly income after taxes. Then, begin to create expense categories. First, write out your fixed expenses (rent or mortgage, insurances, utility bills, and anything else that stays the same or similar each month), then move to your variable expenses (the ones that change month to month like entertainment or dining out). Be specific and honest with your categories. Keep track of the spending on your phone or on a small notebook in your car. Every dollar.
Increase Your Monthly Income
Another good resolution to help with debt is to aim at increasing your monthly income. It could be as little as $100 a month or up to $1,000. No matter what the number is though, make sure it’s realistic for you.
There are many side gigs you can do on top of your full-time job. You can get into some freelance work, teach students on the side (for example, guitar or piano lessons), or if you have a hobby in which you create things, you could start selling them. You can drive for Uber or Lyft a few nights a week, for example.
Set Up a Savings or Emergency Account
Even though if you are in debt and you want to retire it quickly; it’s important that you have an emergency fund. That money is not there for whenever you want it. It’s there for when you absolutely need it.
Ask yourself if you could afford a $500 unexpected expense right now. Would you be okay, or would it push you even farther into debt? Either way, it’s in your best interest to start setting aside small amounts of money each month into an emergency account.
Target a Certain Debt
If you have multiple debts, one of your resolutions could be to target a particular debt. Instead of making the minimum payments on each debt every month, bump up the amount you pay for one debt that has the highest interest rate.
Take the debt with the highest interest rate and make that your primary target first. With the other debt, keep up with the minimum payments. Once you pay off the debt with the largest interest rate, that money can go towards the next debt, and so on. It will turn into a snowball effect until you have everything paid off. It might take years to get there, but at least you will be on the path to paying everything off and avoiding bankruptcy.