6 New Year's Resolutions for Dealing with Personal Debt
Getting a better handle on your household finances and the amount of debt you are shouldering is a great way to gain peace of mind and achieve financial stability in 2020 and beyond. These tips will help those looking to get out of debt understand how to stay out of debt. As always, if you have questions about your debts and need an experienced opinion, contact the lawyers at Sasser Law Firm.
Here are some time-honored tips for getting out of debt.
Track your spending. Keeping track of where your money goes is the start of controlling your spending and debt. First, list all your long-term debts such as a home mortgage, student loans, and car loans. Then write down your other monthly obligations – insurance, credit card bills, utilities, cable TV bills, internet, and insurance premiums. Starting on New Year’s Day, write down every cent you spend during the month of January. Don’t leave anything out.
At the end of the month, subtract your spending from your income. If you come up with a negative number, that is the amount of debt you incurred. Look for discretionary spending that you can cut out right away and debts that you can set a timetable for paying off.
This is Household Budgeting 101. There are multiple ways to track your spending, ranging from pencil-and-paper lists to apps. Any method that is reliable, whether electronic or paper and that you will stick with is the right one.
Cut out costly habits. The budgeting exercise above will inevitably show a few surprises. Those daily afternoon sodas or morning lattes? They add up. Cutting out high-cost drinks and brown-bagging workday lunches instead of eating out at lunch results in some quick savings. Other habits, such as smoking, drinking or gambling are extremely costly but may require counseling to break. Cutting back or eliminating them will save you bundles and improve your health, as well.
Buy only what you can afford. Pay for all discretionary spending with cash, not with credit cards. Multiple studies say that credit cards make you spend more. That doesn’t even count the higher cost of interest on credit card debt. If you have to use hard-earned cash to pay for a purchase, you’ll give it more thought.
In consumer debt management, something easy to remember is the 50/30/20 guideline. The guideline says to apply 50% of your income toward necessary expenses such as shelter, groceries, utilities, transportation, child care, and loan payments, allocate 30% for flexible spendings such as eating out, entertainment and vacations, and 20% toward paying down credit cards and contributing to saving. If you spend less than 30 percent of your income on entertainment, it can allow you to apply more to paying off debt.
Set goals. Now that you have a household budget, decide where you want it to take you. Setting goals is motivating. Set concrete goals, not just “spend less” or “save more.” You should set long-term financial goals and some short-term goals. Make sure they are all realistic goals. The success is motivating, too.
Some options for financial goals include saving a specific amount for a down payment on a car or home or working to establish an emergency fund of three to six months’ worth of living expenses. Another goal might be to pay off a specific debt within a set amount of time. Here’s more about the why and how of setting and keeping financial goals.
Cut housing expenses. If your monthly housing expenses account for 50% or more of your monthly take-home pay, you qualify as “severely cost-burdened,” according to an analysis by the Joint Center for Housing Studies of Harvard University. If you are struggling to make your mortgage payments each month, you may be able to reduce your monthly payments by refinancing the loan and extending the repayment period from 15 years to 30 years, for example. You have to have a place to live, but if you are burdened by monthly housing costs you may want to shop around for a less-expensive apartment or a more affordable mortgage.
We hope that the new year will provide an opportunity to reset your expectations about spending during the coming year and get your personal finances in order. If you have an unmanageable amount of debt, you may want to speak with a bankruptcy attorney about your legal options. Although it’s typically a last resort and not right for everyone, bankruptcy is a legal tool to help honest people make a fresh start.
Personal bankruptcy allows an individual or married couple to get out from under burdensome consumer debt. By filing for Chapter 7 or Chapter 13 bankruptcy, you immediately have the strength of a court-ordered “stay” that stops creditors from contacting you, prevents your wages from being garnished for debt payment and halts foreclosure on your home or repossession of your car. Once a bankruptcy is processed, certain types of debt, including credit card debt, utility bills, medical bills, and personal loans, are discharged or restructured.
Contact a Raleigh Personal Bankruptcy Attorney
If the tips above for getting out of debt and beginning to establish financial stability in 2020 seem out of reach, maybe bankruptcy is something you should consider. The board-certified personal bankruptcy attorneys at the Sasser Law Firm can assist if you have questions about personal bankruptcy in the Triangle area.
Our Raleigh bankruptcy attorneys have helped thousands of North Carolina residents and business owners work through financial hardship and deal with overwhelming debt. Since 2000, we have filed more than 8,500 cases. Our goal is to help each client get back on track financially. Take a look at our FAQs or call us today at (919) 278-7986 for a free discussion of your situation.
We can meet with you at no charge to answer all your questions and map out a strategy for moving forward in the New Year. Bankruptcy is not right for everyone facing financial difficulties. We will tell you if there’s a workable alternative that better meets your needs.