You may be feeling impatient to start more aggressively paying down debt, but it’s important to first create an emergency fund. If you don’t have money socked away for unexpected expenses, you’ll be tempted to use the money that’s already earmarked for your debt payments to fund this expense.
Experts recommend keeping three months’ worth of living expenses in an emergency fund, but you can start with a modest $1,000. Set up an automatic monthly or weekly transfer from your [credit union] Checking Account to your Savings Account until you have a fully padded emergency fund. This may take several months, but no worries, you can continue following the next few steps towards a debt-free life as your emergency fund grows.
Why do you think it’s so important to have an emergency fund? Share your thoughts with us in the comments.
Negotiate a Lower APR
If the majority of your outstanding debt is credit card debt, you may be spending hundreds of dollars just on interest alone. Aside from wasting money, this keeps you from moving forward and paying down your debt.
Most people don’t know you can call up a credit card company and negotiate for a lower APR. Take the time this month to do that. Explain that you are working on paying down your debt and that the interest payments are impeding your progress. You can even research competing cards and cite their interest rates in a bid for a lower APR from your current credit card company.
Lowering your interest rates will allow you to make another real step toward getting rid of debt.
Have you ever negotiated for a lower APR on your credit cards? Share your success stories with us in the comments!
You’re determined that this will be the year you finally pay down (or pay off) that debt. Get ready, because every month, our Do It Today plan will have you taking another step on your journey toward living a debt-free life.
First, sit down and take stock of all your debts. Don’t let the numbers scare you; you need to do this to move forward. Get out every single credit card bill, personal loan, student loan, and any other debt you’re carrying (except your car and mortgage payments). Tally up the numbers to give yourself an idea of what you’re dealing with.
Next, organize your debt into different categories, such as credit card debt, student debt, personal loans etc. Use a spreadsheet to list your debt, the remaining term of each loan (if applicable), the minimum payment and the interest rate.
Finally, designate one hour each week for working on your finances.
Did you take stock of all your debt? Did the numbers surprise you?