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Survey finds 59% of Americans are starting 2021 with debt

Here are 5 ways to reduce debt

FALLBROOK – With many people wanting to start 2021 on the right financial foot, tackling debt may be at the top of the list. According to a recent survey from TopCashback.com, 64% of Americans are starting 2021 with credit card debt.

Whether they went over budget on holiday shopping or they want to get ahead of their finances this year, here are five tips to tackle debt from Rebecca Gramuglia, consumer expert at TopCashback.com.

Cut back on frivolous spending.

Take the time this new year to reset and curb any unnecessary spending that you may have indulged in. Whether it’s ordering takeout multiple times a week, online shopping constantly or anything in between, make it a point to identify these spending habits and limit them this coming year. And of course, treating yourself once in a while is OK, too. Pro tip: Hold yourself accountable by enlisting a money buddy or significant other to help you stick to your money goals.

Use a repayment strategy that works for you.

If paying off debt is one of your top priorities for the new year, avoid paying extra on interest charges by using a repayment strategy that works. To better tackle debt, try the “avalanche” debt-repayment method which prioritizes your debt repayment based on the interest rate. Borrowers should analyze each of their debts’ interest rates and list them from most expensive to least expensive while making the minimum payments on all but the debt with the highest interest. The debt with the highest interest rate should have as much money as possible thrown at it above the minimum payment amount. Repeat until the highest debt has been repaid, then redirect the extra cash to the debt with the next highest interest rate.

Incorporate a budget that fits your lifestyle.

Spending and saving go hand in hand and to ensure you save and splurge within your means, consider adopting the 50/20/30 rule. Spend only up to 50% of your after-tax income on essentials, such as mortgage and taxes; 20% on financial priorities, such as debt repayments and savings and 30% on wants or lifestyle choices, such as shopping and any other personal expenses. If you’re trying to expedite the debt repayment process, you can adapt the rule to reflect your lifestyle. Instead, try putting 30% of your monthly budget toward your financial priorities and 20% toward personal expenses.

Start paying with cash.

By paying with cash, you are limited to what you can purchase based on what you have in your wallet. In addition, you will also avoid taking on extra debt and higher interest payments. Keep in mind that some stores do not accept cash.

Avoid spending triggers.

Overspending happens for various reasons and it’s important to know what your spending triggers are. Whether it’s having a bad day, boredom, social media pressure, stress or anything else, try to take note and avoid these situations that will prompt you to use your credit card. Instead, consider only carrying cash, use a debit card, beware of overdraft fees or only charge what you can pay off in full each month. And if you need to dodge spending altogether, sometimes taking a walk or stepping away from the computer can reset your mind.

Submitted by TopCashback.com.

 

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