It’s easy to fall into debt, especially when you don’t know what your options are. Chances are, you’ve attempted to navigate the world as best as you can while trying to save as much money in the process.
That’s a good start, but there are some more strategies that you can try to get out of a financial sinkhole quicker. From refinancing your long-term loans to automating your monthly bills, you’ll be able to pay off more debt this year (and hopefully have some extra money left over).
Depending on what type of mortgage you have, how long you’ve had it, and how much your credit has improved, it might be worth refinancing, especially if you plan on keeping your current house for the foreseeable future.
By refinancing your mortgage, you could qualify for a lower rate, stop paying mortgage insurance, and shorten the length of your loan. However, you’ll have to do your research.
If you’re not careful, you could end up with a higher rate, more interest, and lots of closing costs. After all, refinancing costs, such as originator fees and an appraisal, could add up to 3% of your loan amount. Be sure you have all of your ducks in a row before refinancing your house.
Another type of loan you could consider refinancing is your student loan. Again, there are pros and cons to refinancing student loans but the benefits are impressive. Just like when you initially applied for a student loan back as a freshman, you’ll have to first be eligible for a new loan.
Refinancing basically means you’re taking out a new loan for the total amount of your previous loans, but hopefully with better terms, like lower monthly payments and lower interest rates.
If you have multiple student loans—say one per year of school—you’ll be able to consolidate these into one loan and one monthly payment.
Another advantage is that you’ll have the luxury of shopping around for a new lender whereas you may have had limited choices as a younger student with less credit history and, let’s face it, less knowledge.
2. Audit Your monthly Bills
Take a moment to look your monthly bills over. What could be cheaper? What could you stop paying altogether? Which subscriptions, like Netflix or Good Housekeeping, could you live without?
You can also try renegotiating some of your bills. In fact, there are apps out there that will do this for you. This might make you wonder, what else could be done for me?
Well, home maintenance is another expensive bill that could cost less. Signing up for a home warranty could cut your repair bills in half. For example, if your dishwasher breaks, you could be facing a bill of $150 to $1,000.
If you have home warranty coverage, you’ll pay a small service fee of $75 to get it repaired or even replaced with a brand new appliance. Note: most homeowners file two major claims per year, which means you could pay $150 for thousands of dollars worth of repairs or replacements.
3. Improve Your Credit Score
Your credit score plays a huge role in your finances and vice-versa. It’s a measurement of your total finances, including your financial history.
Your score is based on information in your credit report, like how many credit cards you have, the balances of these credit cards plus your loans, any delinquent payments you haven’t paid, bankruptcies and other factors.
Lenders will look at your credit score to decide whether or not to approve your loan and at what interest rate.
To get the lowest interest rate, you should have a credit score of at least 760. To give your credit a boost, you can: put more money toward your monthly loan and credit card payments, keep your longest line of credit open, and avoid opening more lines of credit.
4. Be Cheap!
Creating a budget is one thing. Adamantly sticking to a budget is a whole other ball game. This means you have a certain amount of money to pay your major expenses each month, a certain amount to put toward debt, and a little cushion for personal spending.
You’ll have to make some hard decisions, like choosing to stay in on the weekend rather than going out with friends. You might have to push your vacation to next year.
You’ll have to keep the big picture in mind whenever you feel an impulse to purchase something for short-term happiness.
5. Enroll in Auto Payments
My last advice is to enroll in automatic payments for as many bills as you can. This set-it-and-forget-it strategy will make sure you don’t overspend on frivolous things and that you meet all of your minimum payments on time.
Setting up automatic payment methods will not only save you money, but it will save you time too. With these smart strategies in place, you’ll have a much more efficient year, which should set you up for long-term happiness for years to come.
Paige A. Mitchell
Paige Mitchell is a freelance writer who enjoys sharing practical financial advice. You can reach her at firstname.lastname@example.org.