Debt can catch us unawares—expenses mount up—and unexpected events like time off work from illness can aggravate the situation further. Here are a few tips from financial experts, including those at Forbes Magazine, NerdWallet.com, and CreditKarma.com, that can help you trim debt and get a sound night’s sleep.
- Create a sensible budget. In order to know what you can afford to spend and save, you need a roadmap: a budget. Your Credit Union has an awesome financial wellness Budgeting Tool as part of its industry-leading financial education series.
- Pay down the costliest debt first (think highest interest rate). But if you’re more motivated by getting rid of smaller debt, attack your smallest debt balances to start, for psychological motivation. Doubling a minimum credit card payment is a good initial target.
- Put bonuses or “found money”, like a tax rebate, to work for you by using it to pay off debt and/or putting it into savings like your Credit Union’s industry-leading Certificates.
- Give yourself a pat on the back. Set milestones on your way to financial freedom and celebrate them with small treats—maybe a nice meal—so your journey feels like an adventure, not a punishment.
- If you are 70 1/2 years of age or older, you may be able to get a tax advantage by giving some money to charity using your IRA funds. Consult a tax professional first.
- With new tax laws and a potential next recession on the horizon, paying down some mortgage debt is worth considering as a debt-reduction strategy if you aren’t in a high tax bracket, and typically take a standard deduction.
Remember that a home equity line of credit no longer automatically qualifies as a tax deduction. The IRS notes, if you want to use it to lower your tax bill, it should be used “to buy, build or substantially improve the taxpayer’s [primary]home that secures the loan.”
And our best tip — never hesitate to speak with your Credit Union for impartial advice about how to make savvy choices with your money. This includes contacting us for a free, no-obligation Financial Wellness Check for easy strategies/tips to do more—save and earn more—with your money.