Smart Money Move #6: Turn debt into savings

Financial Moves #6

How to get out of debt

Getting out of debt requires you to spend less money than you earn on a consistent, long-term basis. Debt reduction helps to increase your credit score, reduce stress, and helps you reach your financial goals faster. To be successful requires discipline, but it's easier than you think. Here are five steps to get your debt in check.

cashStep 1: Identify your debt and devise a plan to pay off your high-interest debt first. Use our debt payoff calculators to help you get started. 

Step 2: Stop using your credit cards. Take them out of your purse or wallet and cut them up.

Step 3: Stop the flood of credit card offers by going to optoutprescreen.com.

Step 4: Pay more than the minimum amount due each month.

Step 5: Consider consolidating your debts to take advantage of a lower interest rate. Be sure to ask about any fees if you're considering transferring or consolidating debt.

Beyond debt

At the same time you're tackling debt, don't forget to save. To do this, you need to pay yourself first. Develop a budget around saving and not the other way around. There are two types of saving:

  • Short-term saving = Things like car repairs, a new furnace, etc. Build an emergency savings fund to pay for unexpected expenses like these so you won't have to look to credit cards to fill the gap.
  • Long-term savings = Your 403(b), IRA, etc. Once your debt is under control, start or increase contributions to your 403(b) or IRA. Want to open a 403(b) or IRA? You can easily enroll online.
DBJ open 403b or IRA
Redirect your dollars

Don't let newly freed-up money work its way back into your spending. If you're done paying daycare, a car payment, or student loans, redirect that money to savings. 

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