With the expected rise in interest rates, the one resolution you should be sure to keep is the promise to reduce your debt. Admit it, we all say it. Be it credit card debt, student loans, mortgages, car payments etc…we all vow to save more money this year and pay off our debt simultaneously. Oh, and let’s not forget weight loss.
Last year, I promised to go the gym to swim. I signed up and even managed to go around a dozen times. By April I came up with an excuse to not go (the pool was always full with different courses).
According to data published by Statistic Brain, 8.5% of people’s resolutions is to make better financial decisions. Saving more is even more important this year because US interest rates are set to rise throughout the year. The Federal Reserve raised the rate on short-term loans by a quarter of a point this December and anticipated that more, perhaps three, would come in 2017. This changes the outlook for recent years in which rates both Long as well as short term have been at historical lows and converted the debt into a more or less bearable burden.
The price of money is not expected to rise dramatically but we must prepare to pay more in the coming months for credit card balances and similar loans that have a variable rate.
Wages, at least in some sectors, are beginning to experience upward pressure because there are fewer job seekers and employers have to start offering better compensation to get or keep employees.
I could go on and on, but with the amount of literature out there, hopefully you’re convinced that paying down debt is something to be taken seriously in 2017 as interest rates are only expected to rise even further throughout the year. Here are some tips to help you stay on course, and not throw in the towel early (see what I did there 🙂
- You have to be realistic. Set goals that are possible to achieve because otherwise there is no way to maintain the spirit of self-improvement or sacrifice. Many of the purposes of the beginning of the year are, in essence, a script for a change of lifestyle and that, is not an easy task. Be generous with yourself and don’t make your goals too difficult. With respect to your debts, make a budget of your income and expenses, calculate an amount or percentage dedicated to reduce what you owe, and separate it from the money to which you have access for current expenses. Start with a comfortable amount and progressively go up.
- Remember your motivation. If you have high credit card balances, look at the issuer’s projections about what it costs to pay the debt at the current interest rates. Either look it up online, call them, get it via snail mail etc…just do it. You may be surprised.
- Identify short-term goals. Make these goals easily quantifiable because if they are very vague, the goal you are looking for can go awry with your excuses.
- Don’t try everything at once. Don’t try to change your life from overnight because it rarely works, and it’s certainly not a motivating process. Don’t try to quit smoking, eat less and pay off debt at the same time. Set up a monthly purpose calendar. Maybe it’s better to lower your credit card debt in January, try to improve your diet in February, and go to the swimming pool to get fit in April (when those who are like me will not bother you anymore).
However you go about doing it, just remember that slow and steady wins the race. It’s better to pay down even a little bit of debt on a consistent basis than to try to carve out huge chunks of it infrequently (unless you suddenly come into a windfall of money of course). Anyway, I digress. Although, being healthy is certainly important, let’s be real, most of us need to be monitoring and improving our financial health. Make this the year that you finally do it. Good luck!