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According to USA.gov, the number one new year's resolution for Americans is to lose weight, but reducing debt and saving money come a close second and third. The average American is $8,100 in debt, according to the Federal Reserve and U.S. Census Bureau. Loans for cars, college educations, recreational vehicles and even vacations comprise nearly two-thirds of consumer debt. Another thirty-six percent of consumer debt is revolving debt, such as credit card debt. Are you ready to improve your financial health this coming year?
Start by listing your income from all sources. Next, list your monthly expenses and organize that list by payments that are debt-related (loan, credit card payments) and those that aren't (insurance premiums, utility bills, groceries, clothing and entertainment and recreation). Then, prioritize both groups by what is essential and what isn't. This way, you'll get a better understanding of how much money you actually have to spend and where you are currently spending it.
Your next challenge, then, is to find ways to reduce what you are spending on expenses that aren't debt-related so that you have more to save and apply to loans or credit card payments.
Once you have a little extra money, make it work for you. Pay more than the minimum amount due on your loans and credit card bills, even if it is only $5-10 more. Tell your creditors that the extra amount is to be applied to the principle balance, not the interest. This will help lower your monthly payments and improve your credit score, which can lead to lower interest rates. Also, don't be afraid to negotiate with your creditors for lower interest rates or a longer loan term. Most of them will be willing to work with you to make your payments more manageable as long as they know they are going to get their money. Don't wait until you are in trouble or in debt collection. You'll have more bargaining power when you are proactive.