Debt is sweeping the nation. With student loan debt becoming astronomical among millennials and credit card debt piling up in the background, it can feel overwhelming that your savings is getting the short end of your paycheck. According to the Federal Reserve Bank of New York, Americans’ total household debt has reached $13 trillion – a record high. Thoughts of financial stress flood our minds like how we are going to afford our current lifestyle and our future in retirement.
Don’t know where to start? Outlined below are some initial steps in helping you recover from debt and work towards financial security for your future.
1 Identify bad spending habits: In order to tackle your debts, you are going to need extra cash flow. Identify where you can cut spending.
2 Set up an emergency fund: If you lose your job or you are hit with an unexpected expense, you need to be ready. A good rule of thumb is saving enough for 3-6 months of expenses.
3 Pay at least the monthly minimum: If you don’t pay off the minimum, your credit score will drop, you might be stuck with penalties and become at-risk for bankruptcy.
4 Prioritize by interest rate: After paying the minimum on each debt, pay more than that on debts with higher interest rates. This will save you large payments in interest down the road. Credit cards tend to have the highest interest rates.
5 Consider refinancing / consolidating: For debts like student loans or mortgages, you may be paying more interest than you should. Search for lenders and their current offerings for refinancing. By doing so, you may reduce your monthly payment AND the period of the loan.
For more information, Contact your MCF Financial Advisor, today!
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