Publish Date - September 22, 2021
Author: Katie Conroy
How To Clean Up Your Finances
Considering that studies reveal the majority of Americans are in debt, it’s no wonder that money is the biggest cause of stress in the US today.
Considering that studies reveal the majority of Americans are in debt, it’s no wonder that money is the biggest cause of stress in the US today. Data suggests that the lion’s share of debt is derived from mortgages and student loans, but medical care and credit card commitments are the number one reason why people file for personal bankruptcy.
If you find yourself in over your head but don’t know where to start in order to correct your situation, it’s time to take a deep breath and clean up your finances once and for all. Don’t let fear prevent you from making changes, as you’re only likely to rack up more debt. Here’s how to get on the path to financial freedom.
Obtain A Credit Report
You see the commercials, but do you really understand the importance of obtaining a credit report? Along with information about who you are and where you live and work, the document is a compiled list of all of your debts/accounts, how you pay your bills, and whether you’ve ever filed for bankruptcy or have had a home foreclosed or a vehicle repossessed. You should order a report at least once a year (you’re entitled to one free copy) to ensure all of the information listed is accurate — this is an important practice to make sure you weren’t a victim of identity theft and that your credit score is where you want it to be.
- Why a Credit Report Is Important
- What Is Considered a Bad Credit Score?
- How to Improve Your Credit Score
Create A Budget
After obtaining your credit score, it’s time to create a budget or finetune your existing process. Create a budget that covers everything you spend money on, and stick to it. Even something like groceries can get out of hand if you go into the store without a plan, so keep a log of what you’re spending each month so you can stay on track. Also be sure to plan in advance for months where there might be extra cash going out, such as the holidays or a vacation.
Work on Your Student Loans
It seems like most people of a certain age (especially Millennials) have at least some student loan debt. These funds often have a grace period for repayment, but be careful, because that sometimes means you’ll be hit with sky-high interest rates as soon as you’re expected to start paying them back. Even if you can only make minimum payments each month, don’t forget to factor in your student loans when cleaning up your finances.
- Should You Pay Off Student Loans Early?
- How Much Interest Will You Pay on Student Loans? -- A Calculator
Start a Side Hustle
Getting out of debit might require that you take on extra work, at least temporarily, so that you have more income to put toward paying down your debt. Thankfully, these days there are many lucrative ways to make money on the side.
- What Are the Best Spare-time Businesses?
- How Do You Generate Passive Income?
- How Do You Pay Taxes on Gig Economy Income?
If all else fails, consider hiring a financial advisor to help you get on track. Along with helping you establish actionable short- and long-term goals, a good aide can reduce your financial stress while educating you on how to allocate and/or invest your funds. It’s likely that this pro has expertise and knowledge that you don’t have, so it’s worth paying the fees so you can get back on track.
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