How to Spring-Clean Your Debt
There’s no reason why you shouldn’t be thinking of doing something new and exciting this spring. After all, spring is the best season to do away with the old and bring in the new. If you are thinking about various ideas, here is one interesting yet great idea – spring-cleaning your finances.
Spring-cleaning your debt is a great financial decision. Although it may seem boring or daunting at first, once you actually do it, you will find yourself being carefree for the rest of the financial year. It is not a simple task, yet cleaning your debt and maintaining it for the rest of the year will reduce much stress and worry in your life.
Here are some simple spring-cleaning steps for debt reduction that anyone can follow. Use this guide to clear your debt and ensure a great financial year.
1. Calculate Your Debt
First, calculate your debt. Note down all of your debts, no matter how big or small each payment is. This includes any current loans, credit card bills any money you owe to someone, or anything else that can be categorised as debt. Include the interest for any loans or credit card bills.
Start with your biggest debt and ensure that your list contains everything. This step will help you to calculate exactly what you owe.
2. Analyse Your Finances
Next, note down your monthly income and any other money that you may receive. This includes your regular pay, part-time pay, monetary gifts from family or friends, work bonus, fixed deposits or any returns from investments, and investment-linked insurance policies.
This would be the total sum of all the money that you would get. This step will help you analyse your finances and know exactly how much money is coming in.
3. Create a Budget
Naturally, the next step is to create a budget. Always try and make a reasonable budget, otherwise it may be difficult for you to adhere to it. Make a list of all expenses that you incur in a month. This would include all of your bills every month, such as groceries, fuel, utilities, internet, gas, rent and so on. If you have medical bills such as medicine or health check-ups, you need to include them as well.
Next, calculate how much money you can get in a month. This would primarily include your monthly salary or any fixed income you would get each month. Prepare your budget based on this information.
Some form of income or returns may not come in every month. In such cases plan ahead so that when they do come in, you can use them wisely to clear off a loan or pay a huge bill. This step will help you plan your finances wisely to clear off any debt quickly.
4. Discover Additional Earning Options
Now see whether there are any options for you to clear your debt quickly or increase your income. You could take up temporary work or a part-time job if you’re healthy enough to cope with the added demands. If your birthday or wedding anniversary is coming up soon, then you can expect some money as a gift from family or close friends.
You may be up for a hike in your salary, be eligible for an annual bonus, or get returns from your fixed deposits and investments. Keep in mind to make a note of all such available options. This step will help you put such additional funds to good use in clearing your debt.
5. Eliminate Unnecessary Expenses
Everyone does go through unnecessary expenses now and then. It could be buying something on a whim and not using it or it could be buying something just because everyone has it. The next step is to identify all unnecessary expenses. You could even take help from a family member or close friend to identify such expenses.
Once you have the list of all such unnecessary expenses, it’s time to eliminate them. Analyse those expenses and calculate the money you can save when you remove such expenses. See whether you can use those savings to clear any urgent or important debt.
This does not mean that you have to be content with only basic needs and not enjoy anything else. You can clear your debt quickly and then use funds to do the things you wish to do. Then, you do not have to worry about interest charges or late payments. This step will help you save money and use it wisely to clear your debt.
6. Set Goals
This is an important step everyone needs to follow. Setting goals gives motivation to achieve such goals. Financial goals are equally important as personal goals. Set an easy goal. You can plan to clear one loan or one credit card bill within six months.
Another thing you can do is plan to pay the minimum due on all your debt each month on time. You can even set a goal of saving a certain amount of money each month and use it to clear your debt.
Whatever goal you set, make sure it is an easy and achievable goal. There is no point in setting extreme goals that’s seemingly impossible to achieve. This step will allow you to actually follow up on all the steps mentioned above.
- Set up automatic payments each month to ensure that you pay your loans and bills on time.
- Check your credit report regularly to ensure that you are maintaining a good credit score.
- Pay more than the minimum due each month whether it’s your loans or credit card bills.
- Do not take multiple loans or credit cards until you finish paying your outstanding dues.
- Discuss your finances with your family so they can help you clear your debt quickly.
Advantages of Spring-Cleaning Your Finances
- You do not have to carry the same financial baggage each year.
- You can start fresh on your financial plans.
- Clearing debt reduces stress and worry resulting in a healthy lifestyle.
- You can invest your money or save money for a secure financial life.
Do Not Procrastinate
Many think of spring-cleaning their finances but very few actually manage to do so. Some people even think of putting it off for the next day, week, or month. Remember to never procrastinate such decisions. Piling up debt is not good for your financial, physical, mental, and emotional health.
The quicker you settle your debt, the sooner you can lead a content life without undue stress or worries. Treat yourself whenever you achieve your goal each month. Look forward to the day where you no longer have to worry about debt. Spring-clean your debt now and enjoy a secure future.