Next year I’ll be debt-free!

The end of 2009 is approaching very fast. What are you going to write in your New Year resolution? I’ll quit smoking, I’ll lose weight, I’ll spend more time with my family and friends, I’ll manage my money wisely… According to Edward Jones poll, one of the biggest priorities for Americans is debt relief. Why not join the millions of people who have resolved to get a handle on their finances in 2010? Most of us can go the self-help route and get things back under control.

Self-Help

The beginning of a new year is a wonderful time to think about changing your financial habits and getting away from owing money. Whether your personal financial crisis is caused by the loss of a job, serious illness, or overspending, the situation doesn’t have to become worse!
However, it’s clear that most plans are easier written than done. Here are five steps that will help you translate your New Year Resolution from wishful thinking into the real action:

• Step 1. Set realistic goals that you can achieve. For example, buying lottery tickets to win 1 million dollars and cover your debt sounds too fantastic, sorry. However, you can try to pay more than the minimum due. According to new credit card laws, any payments that exceed the minimum due will be applied to the balance with the highest interest rate first. It means that your additional payment will let you minimize your finance charge and pay off your debt sooner.
• Step 2. Formulate clear steps to complete your goal. Instead of “I don't want to have that debt!!” write “I will not make spontaneous purchases”, “I will use cash during the year to avoid hefty fees and interest”, “I will not open unnecessary credit cards”, “I will keep track of my expenses in Quicken or Microsoft Money” or “I will pay my bills at least five days before the due date”.
• Step 3. Break the process into smaller tasks. For example, you can commit to cover your credit card debt through careful budget planning, making regular timely payments, switching to a new balance transfer card with lower interest rates or consolidating your debt through a second mortgage or a home equity line of credit. Approaching the debt monster from this angle makes the whole task easier, right?
• Step 4. Analyze what was the reason of your financial troubles. It will help you prevent getting into financial hole in future. Do you spend money to relax yourself? Think about cheaper ways to entertain yourself like reading or walking. If you didn’t have enough money to make payments after job loss or other life-changing accident, build a decent rainy day fund. Saving at least a few dollars each month will help you meet expenditure needs in the emergency.
• Step 5. There’s no shame in seeking professional help. If you can’t create a workable budget and live within your means, there are many non-profit credit counseling organizations that will help you get out of debt. They will evaluate your financial situation and develop an appropriate debt management plan based on your income.

New Year – new fresh start!

Debt relief has increased in importance for many people. If you are in that boat, it’s time to kick your bad habits and take your financial destiny into your own hands! By taking a systematic approach to your New Year's resolution of becoming debt-free, you can significantly increase your chance of getting the desired result. Plus, new federal credit card laws will make it easier to manage your finances by limiting the high interest rates and fees that credit companies may charge.