As bills from the holidays start to stack up, many may start 2013 with financial resolutions to reduce debt, cut back on spending, and be more responsible with credit. And, like most resolutions, keeping those promises will take discipline and an achievable plan of attack, say experts. Here are three ideas to get you started.
Make a resolution to stop using credit cards and instead use cash or debit cards, advises Dave Ramsey, nationally syndicated radio talk show host and author of The Total Money Makeover. Next, list your existing credit card debt, and all other debts except for your home, and pay them off from smallest to largest using the debt snowball plan . Pay as much as possible on the smallest debt, while making minimum payments on the others. Then, once you’ve paid off the smallest debt, take the money you put toward it each month and apply it to the next one and the next. Pay off the smallest debts first for quick wins, says Ramsey, to give yourself motivation to reach your goal.
Track how much you spend and then look to cut back on unneeded expenses, such as morning lattes, fast food snacking, and extravagant gifts. Put this money aside for long-term financial goals and/or reward yourself at saving milestones with creative (free) treats in your neighborhood and community. The money you put aside will ensure a more secure future and help everyone in the family learn the importance of budgeting and saving.
Higher credit scores can translate into lower interest rates on loans and credit cards, lower auto and homeowner insurance rates, and lower deposits to utility companies. To improve credit scores, you should identify and improve on issues flagged in their credit report (like high credit card balances or delinquencies), says John Ulzheimer, president of Consumer Education at SmartCredit.com. To request a free credit report, visit www.annualcreditreport.com . For your credit score, visit CreditSesame .