Despite the popularity of New Year’s resolutions and the idea that a new year brings new opportunity, many consumers are actually extremely unhappy in the beginning of a new year. In fact, the first Monday of the new year is now being called “Blue Monday,” dubbed by a group of researchers as being the unhappiest day of the year. Points of grief include debt, divorce, the weather, and having to return to work. At Clearpoint, we don’t think anyone should start their year off on the wrong, unhappy foot. We don’t want any financial mistakes of the past to keep holding you back, and we don’t want a fun holiday to spiral out of control and become a financial burden. Instead, we want to help you overcome the blues in 2014, and we can help you tackle at least one of these issues—debt. Let’s take a closer look at how you can pay down your debt along with some other financial strategies to make 2014 a great year for your credit and your finances as a whole.
Pay off Credit Cards
When it comes to paying off debt, a good rule of thumb is to start with the highest interest rate. This method helps you get out of debt the fastest and is the smartest from a mathematical perspective. And usually, credit cards carry the highest interest rates—unless you’re dealing with something like a payday loan.
Credit cards are important to pay attention to this time of year. A lot of consumers used credit when buying gifts for the holidays, and you don’t want to let that interest spiral out of control. Try to pay your balance in full, and if that’s not an option make the highest payment possible (without dipping into an emergency fund or leaving some “cushion”).
We hope this isn’t the case, but if you’re in over your head or already had a decent amount of debt from before the holidays, consider signing up for a credit counseling session. It’s completely free, and it could open doors to a debt management program that could help you get rid of all your credit card debt.
Explore Options for your Student Loans
If you have student loan debt, 2014 could be the year that you make great strides toward paying it off or at least managing it. Evaluate your overall financial situation, and see if you can begin to pay more than the minimum toward your loans. You will be a good candidate for this strategy if you have low amounts of credit card debt and an established emergency fund. If this sounds like you, read our guide on the best way to pay off student loans to get started.
If your student loans are still a heavy financial burden, that’s okay too. Use this coming year as an opportunity to explore better options for your loans as you make plans for your financial future. For instance, you might be able to have your loans put on an income-based repayment plan. Or, maybe you can reach out to your private student loan company and explain your situation. Doing so just might enable you to receive a deferment or interest deduction.
The main point here is that you should use 2014 to be proactive with your student loans. Don’t just let them sit around and grow into bigger debts. If you need help with this, a student loan counselor can review your financial situation and make specific suggestions about how to get your student loans under control. Sign up today for student loan counseling.
Refinance your Home
If you can secure a lower interest rate on your mortgage, the savings could be significant.
For example, let’s say you have a 15-year mortgage of $250,000 at seven percent interest. After five years, you will have paid about $55,000 to the principal and $77,000 in interest. If you were to refinance to a 3.5 percent interest rate for the remaining 10 years, you will pay an additional $36,000 in interest, but this is far less than the approximate $99,000 you would have paid in interest had you not refinanced. In this example, refinancing could save you $63,000 over 10 years.
For other help with housing issues and concerns, check out Clearpoint’s list of housing services.
Plan for the Future
Use 2014 to think about your long-term financial goals and begin working toward them. If your credit cards and other debts are manageable, try to put away money for retirement and other financial milestones like buying a home. If your employer offers a matching contribution on a retirement plan like a 401(k), try to contribute the amount needed to get the maximum match. Thinking about these important financial milestones now is extremely important and can put you in a much better position later.
Good Luck in 2014
By taking advantage of some of these strategies, you will be setting yourself up for a financially successful year in 2014. Try to take action early and build a routine that you can stick to all year long. And remember, you don’t have to do this alone. The counselors at Clearpoint are always here to help with your financial challenges. Happy New Year, and good luck.