Many consumers are opening their mail around this time and wincing—the holiday bills have arrived. And while it might be tempting to toss those bills in a pile and pay the minimum payment, the New Year can be an opportunity for consumers to take action.
“After you receive those holiday bills, it’s a great time to reevaluate your finances and take steps for improvement throughout the year,” says Patty Hasson, President and Executive Director of Clarifi.
Consumers are not alone with their debt. Credit-reporting bureau TransUnion estimates the average consumer is carrying around $5,000 in credit card debt and that number is expected to rise 8% in 2013.
So what is the best way to tackle that debt? Clarifi has put together some steps to take:
It’s not possible to get a handle on your debt unless you know who you owe and how much you owe. Organize your bills in a way that works for you. Keeping better track of your bills will also decrease your chances of paying bills late and possibly incurring fees.
Define a budget
You need to know how much money you're working with if you want your finances to be successful, whether you have debt or not. Look at your income and your expenses and define a realistic budget that works for you. Along the way, you might find money you didn’t know you had that can be used to pay down debt more quickly.
Pay more than the minimum
Always try to pay more than the minimum on your credit cards. Otherwise, that debt will linger long after you make a purchase. Let’s say you have $5,000 in credit card debt. If you make the minimum payments (assuming an interest rate of 14%), it could take you more than 20 years to pay down the debt and cost you an additional $5,000 in interest!
Tackling debt can be a daunting task, but help is available. Nonprofit credit counseling agencies like Clarifi can work with consumers to define a budget and take steps towards paying down debt. Clients who enroll on Clarifi’s debt management plan usually pay down their debt in 5 years or less and may be able to lower their interest rates.
“Paying down debt is one of the best things you can do for yourself and your finances,” continues Hasson. “It will take a burden off you and your family, allow you to save more money and can also help you improve your credit score.”
To learn more about Clarifi’s services, including their debt management plan, budget and credit counseling, visit clarifi.org/counseling or call 800-989-2227 to schedule an appointment.