After the countdown to midnight ends, it’s time to get to work on keeping your goals for the New Year. While bettering your health with goals like losing weight and quitting smoking, don’t forget to improve your financial health. This year, you could make a huge dent in your debt, and maybe even pay it off — and you could grow your savings. Break down your overall financial health goal into smaller, achievable resolutions.
Resolve IRS Debts
Meet with a tax attorney like those at the Tax Defense Network to determine how to resolve IRS debts. Debts owed to the IRS — for back taxes due to misfiled or unfiled taxes — are some of the most concerning of all. If you don’t come to an agreement on how to best pay back what you owe, you may face prosecution or even land in jail. If you rely on a tax attorney’s help, though, it’s possible you could get a settlement with the IRS and pay less than owed. Having less debt and knowing you’ve gotten yourself out of danger of prosecution is essential to better financial health in the New Year.
Cut Up Credit Cards
The U.S. News reports the average American’s credit card debt is $7,000. Since you’re unlikely to be able to pay that all off in one go, even if you wanted to, interest will continue to accumulate. By the end of the year, if you continue to make only minimum payments, you may only pay off some interest and neglect to make a dent in the total amount owed. If you continue to charge more, your debt will only grow.
The first step toward a healthier financial year is to stop charging more, and that means cutting up your credit cards. You’ll never make any headway on paying off your debt if you add to it. Once you’ve stopped yourself from adding more, focus on paying more than the minimum each month to get the principal amount down.
Budget More Closely
If you think you can’t afford to pay off more of your credit card debt each month, think again. Make a resolution to budget more closely this year. Make a spreadsheet of all of your necessary expenses, including:
- Rent or mortgage payments
- Minimal payments toward loans and debts
- Utility payments
- Grocery budget
- Gas or public transportation costs
- Savings/emergency fund contribution
Adjust the list as necessary, including anything you can’t do without. That does not include cable TV and may not even include Internet or cellphone, unless you need them for work. If the total of necessary expenses is more than your total paycheck each month, you may have to re-think where you live and look for a more affordable place or a roommate if you want to make headway on your debts.
Reduce Optional Spending
Compare your necessary expenses to the amount of money you bring in every month, after taxes. Consider anything that’s optional, such as cable TV, dining out, going to bars or seeing movies, that you spend money on each month. Cut them out for months or even the whole year until you pay down debts. Consider free entertainment alternatives, such as borrowing DVDs and books from the library.
It’s difficult to do when you’re focused on paying down debt, but make the resolution to save more, too. Unexpected expenses like car repairs come up, and if you don’t have the emergency funds to deal with them, you’ll just accumulate more debt. Even if it’s just $10 each month, put some of your income into savings. If you’ve cut your optional spending, you should have some extra money.
If you have a history of breaking your New Year’s resolutions, the secret to keeping your financial resolutions is having a resolution buddy. If you live with someone, sharing financial goals related to your living expenses makes sense, and if you live with a significant other, lowering your credit card debt and increasing savings are mutual goals. At the very least, have a friend check in with you regularly to make sure you’re making progress, and do the same for him or her. Include financial resolutions on your list of goals, and this time next year, you could have money to spare.
About the Author: Mary Sutton is a contributing writer who works for Fertile Content.