How To Use Credit Wisely
Creating a budget and sticking to it is one of the toughest and smartest things you can do to make sure you're on your way to a bright financial future. For you and your family.
- Curb Your Spending: Freeze unnecessary spending while you assess the problem and make plans to get out of debt. Cutting spending can come in many forms. It may mean passing on buying big-ticket items, or it may mean bringing lunch to work or school rather than eating out every day.
- Assess Your Finances: Understanding how much debt you've accumulated is the first step towards reducing it.
- Set Your Goals: Set a big goal. Pay off your debt in three years and then break this goal into a series of smaller ones that will help you reach the finish line.
- Create Your Plan: Put the plan for reaching your goal on paper. Set realistic targets for monthly expenses such as utilities, groceries, medical costs, household needs and transportation, then try to spend even less. Make hard decisions about how to squeeze more of what you earn from your budget to pay off your debt. Don't forget to budget for the unexpected, such as car problems or emergency medical treatment.
- Track Your Spending: Using the plan you've developed, track your spending carefully so you can look for additional ways to save. The more money you can apply to your debt each month, the sooner you should be out of debt.
- Understand Interest and Late Fees: Know your interest rates and what the late fees are on all of your debts. Avoid late fees to ensure they're not adding to your debt, and explore options for lower interest rates. If you can't make a payment, call the banks or companies you owe and talk with them about your situation. If you don't understand or aren't familiar with a debt term, you can refer to our online Glossary for help.
- Pay More than the Minimum: Understand how paying more than the minimum can be a critical first step in reaching your goals. This is particularly true for credit cards, though it may also be useful for paying other loans, such as those used to buy furniture, appliances, or electronics.
- Reward Success: Commit to achieving your goal and figure out what's going to keep you motivated to stay on track. Consider sharing your goal with a "Debt Coach" and asking him or her to help "keep you honest" by checking in regularly to see how you're doing
- Be Patient: It probably took you time to get into debt, so acknowledge that you're not going to get out overnight. Keep yourself motivated. And remember, getting out of debt will change your outlook on life. It's worth the hard work.
- Pay Your Most Expensive Bills First: Interest can add up quickly on debts of any size. Be sure to focus on paying off the ones with the highest rates.