We’ve previously discussed a bookkeeping tip about 8 Easy Hacks to Build Your Credit Score and wanted to continue in this series of helping you build credit, get out of debt, and improve your overall financial outlook with our bookkeeping know-how, even in these difficult times. To that end, we noticed that debt is a huge problem and it seems to be getting bigger. If you are among those who have this issue, below are 10 reasons your debt may be growing instead of shrinking.
1. Credit Card Calamity
If credit cards are part of your growing debt – and that includes just about everyone – it is probably the main source of your growing debt. The simple answer is:
- Leave the credit card at home
- Put it in the freezer – this allows you a few hours to think/thaw on your next credit purchase
- Cut it up
Remember that if you can’t pay cash or check for whatever item you are about to purchase, you can’t afford it. The plastic devil is often the leading source of your debt.
2. Not Interested in Interest
Sure, those credit cards have great introductory rates, but they all go up. Even if you have cut up your credit card and have sworn them off forever, the interest on your old purchases can sometimes end up two to three times more than the initial purchase by the time you pay it off (if you only pay the minimum). This means that $100 pair of shoes can end up costing $200 to $300 by the time you are done both using them and paying for them. Start by paying off the cards with the higher interest or lower balance – whichever will save you more.
3. Use Your Education to Renegotiate
Did you know that total student loan debt in the United States is expected to reach upwards of $1 trillion in the near future? With 80% of those with student loan debt reporting struggling to make the minimum monthly payments, it can be a looming problem. Use some of those negotiating and debating skills you (hopefully) learned in school to talk to your debtors and renegotiate the numbers on your loan, as they can be flexible on the terms.
4. Wedding Woes
Right on the heels of student loan debt are those who spend an extravagant amount on their weddings. The average couple spent $32,641 on their wedding in the year 2015 with the number expected to rise for 2016. For those who can’t get their parents to shoulder the burden of this cost, it can be a financial chain around the neck for long after the first few anniversaries. Experts recommend
1. Planning a realistic budget before spending anything
2. Negotiating with the providers for every item
3. Limiting the guest list.
5. Income Isn’t Enough
If you are one of those unfortunate souls who does need to purchase must buy items on their credit cards, such as groceries or health insurance, it is probably because your income exceeds your expenses. In this case, and it may be unpleasant, it is necessary to do whatever it takes to legally increase your income. A few common ways include:
- Ask for a raise
- Can you rent a room in your home?
- Can you take a part time job?
- Do you have a skill (such as design, writing, translation) that can be done on a freelance basis?
6. Your Expenses Are Too Expensive
If the above still doesn’t fix the issue, it’s time to address your expenses, and nothing should be off the table, including your home and cars. Other smaller items can add up big like couponing, cutting your cable, shopping around for the best rates on insurance, health costs, phone bills, mobile phone bills, electricity, etc.
7. Balance Transfer Debts Have Been Activated
Those with debt often transfer the balances on one or more cards into a low or no interest balance transfer card in order to avoid the interest. However, these introductory offers often expire and the interest will kick in again. In most cases, it is cheaper to pay the balance transfer fee and move the debt into another card with a zero balance transfer, and you can find tons of offers on
Nerd Wallet’s Best Balance Transfer and 0% Interest Credit Cards of 2016
8. No Emergency Fund
Sicknesses, car breakdowns, and other disasters happen. It is always a good idea to have an emergency fund of at least $500 to go to in such a case. If possible, there’s nothing wrong with putting your emergency fund into some sort of interest bearing fund that can be quickly accessed, because having to withdraw $500 or more via a cash advance on a credit card can be very costly.
9. Make a Plan and Stick to It
Now that you have all your income and expenses in line, it’s time to come up with a plan and a budget. This means the first part is setting aside how much money is needed for necessary expenses, investments, and paying down the debt. The second and harder part is sticking to it.
10. Get Pro Help
If you are still having trouble getting your debt under control, talk to a debt counselor. There are many out there who will work at low or no cost and can give you an expert opinion on what needs to be done. See two or three if you have to in order to get it done.
Bookkeeping Tip Expert in Houston
If you live in Houston and need help reducing your debt and improving your bottom line with expert bookkeeping services, send us an email or give us a call at 281-894-6494.