Is being debt-free a top financial priority for you? I have found that being debt-free is high on peoples’ to do list – so you’d think that most would be having great success?
Well I am sorry to say, but recent statistics have found that 27% of homeowners actually increased their debt last year. A further 17% had the same amount of debt that they had last year… the remainder did reduce their debt – but 19% reduced it by less than they had expected.
What are you doing wrong? Here are 3 warning signs and tips to help.
#1 – Did you shop around when your mortgage came up for renewal? Or did you stay with your current lender and accept whatever was offered to you? Your mortgage will typically be your largest financial obligation. I am surprised at how many people fail to shop around and instead take the path of least resistance, which in a lot of cases is not the best or most cost effective.
TIP: Educate yourself about different options – interest rates are important – but you also need to look at the product features too. Your ability to become debt-free may be determined as much by the flexibility your mortgage provides, as by the rate you receive. When your renewal is coming up – look at all the options – then you can make an informed decision and one that will be right for you…
#2 – Are you paying off your credit cards each month? There is no doubt that credit cards provide us with convenience, but if you don’t pay the balances off – the interest rates are hardly worth the initial convenience. It drives me crazy, the whole ‘points’ system that credit card companies use to lure you in with ‘free’ stuff.
TIP: – Now I don’t think that having a credit card is bad – but ONLY if you are disciplined to pay it off and have a budget for spending before you charge on the card. Are your purchases planned ‘needs’ or are they ‘wants’??? Are you tracking your spending? If not… this could be a major eye-opener for you. It’s your money – you need to know where it goes!
#3 – Do you have more than one debt outstanding? …Multiple cards or loans? That usually means there are different interest rates that you are being charged. Ideally you would want all your debt at one low rate.
TIP: – There are 2 trains of thought – depending on what is best for you. 1. Use the snowball method of paying off multiple credit cards – pay off the highest interest rate first – then take that payment and pay the next and so on. 2. Consolidate your debt and pay off with a line of credit from your mortgage – the interest rates are typically lower than any credit card – the key to this though is to cancel all credit cards – (Okay – except the one that you have control over!)… then pay off the line of credit with the allotted amounts that you were paying to the credit cards.
The key to being debt-free is discipline. Financial discipline may intimidate you, but it’s really like any other kind of discipline. Getting control over personal financial matters doesn’t happen by itself. Just start simple and easy, and work your way up to where you’re in complete control of your finances.
PS – If you want financial coaching – I can help ;-) – let me know… Shari