If you recently purchased a home, or are ready to take the plunge and start looking to buy a new home, you’re likely taking a good, long look at your finances. Taking on a 30-year mortgage is no small step and, while buying a home is a great investment, houses aren’t cheap so it may be a little intimidating to add an entire house to your existing debt.
Part of being a good homeowner is being responsible with your money. So, there’s no better time than now to really focus on paying down your debt to get you into a good financial spot. Thankfully, there are a variety of ways to pay down your debts while still managing your daily spending (and maintaining a lifestyle that keeps you happy).
1. Create a Budget - And Stick To It
The very first thing you will need to do in order to pay off your debt is to create a budget that prioritizes those payments. Make sure your budget includes line items for just about everything you spend your money on (groceries, gas, bills, etc). Also, when making this budget be sure to be realistic. If you know that you enjoy going out to dinner a couple of times a week and you’re not willing to give that up, make dining out a line item. This will allow you the freedom to still enjoy life, but guidelines on how much to spend on those nights out.
2. Prepare for Unforeseen Expenses
There’s nothing that throws off debt payoff faster than an unexpected emergency. You can’t prepare for everything, but you can invest in different warranty or insurance programs to help keep you covered when something does arise (because something will definitely arise). While it does add a line item to your budget, the cost of these programs is predictable every month, which is easier when you’re trying to manage your money and prioritize debt over beefing up your savings.
3. Lower Your Bills Wherever Possible
Remember when you were growing up and your parents would follow you around the house turning off lights and mumbling things like “electricity isn’t free, you know”? It’s time to take a lesson from them. Part of managing your money is finding strategic ways to lower all of your bills as much as possible - which means lowering your consumption. You can do this by not running the AC as much, not running the dishwasher unless it’s completely full, or holding off on laundry as long as possible. Additionally, you can call your providers to see if they’re running any specials that may lower your monthly bills - your internet/phone company may be offering promotions that will save you big time over the course of the year.
4. Give Yourself “Fun” Money
When making your budget, make sure you’re giving yourself some “fun” money to do things you enjoy doing. For instance, if you know you like to splurge on clothes, give yourself a reasonable amount of money every month for those impulse purchases. This will help you keep your spirits up throughout the debt payoff process because you’ll still see progress being made on the bottom line, but you’ll also still get to enjoy life. Limiting your spending to the point where you are miserable will inevitably backfire, and you’ll find yourself reaching for the credit cards or dipping into savings for frivolous things. Plan for a little bit of fun to avoid a major backslide later.
5. Find A Payoff Plan That Works For You
The best thing you can do for yourself is to find or create a payoff plan that not only works, but works for you. There are all kinds of programs that have been created already - like debt snowball or debt stacking - that you can use as a guide as you go along this journey. Whatever plan you decide to use or create, just make sure it works for you and your family. Give yourself some wiggle room as needed by customizing it to your situation, so you’ll stay on track for success.
Paying off your debt is possible - even though it can sometimes feel like it’s not. The key is to stick to it for the long haul and prioritize what’s most important to you along the way. You don’t have to sit in the dark eating ramen for dinner every night in order to get to a debt-free life, but you will need to make some small sacrifices along the way. No matter what, don’t give up, because your debt-free life isn’t far away!
Residential Lending would like to thank guest writer Amanda Turner for this very informative article!