Being debt-free is possible for everyone, regardless of income. Learning to manage our debt and spending habits and then focus on saving can be life-changing and positively affect your net worth. Net worth calculates by subtracting your liabilities (debt owed) from your assets (not financed). Both individuals and companies can calculate net worth. It is an accurate determination of how much someone, or something, is worth. In this article, we discuss how you can create a debt reduction plan for 2020.
Consistent growth in net worth is an indicator of good financial health. If liabilities grow faster than assets, or the value of assets drop, it indicates poor financial health and likely a negative net worth.
The most common methods of reducing debt are:
Debt snowball: Pay off your smallest debts first. Focus all the additional money you put toward debt reduction on your lowest debt balance while paying minimums on the rest.
Debt consolidation: Paying down high-interest debts by consolidating them into one or more lower interest debt.
Manage your debt and increase your net worth in 2020 with these simple ideas:
CREDIT CARD DEBT
- Order your credit report through a free reporting online option such as Free Credit Report.com. Per Federal law, you can receive one free report per year. Check your information for errors and contact the reporting agency to correct them.
- Pay off your highest interest rate debt as quickly as possible. If you owe to more than one creditor pay off the debt in order of highest interest rate. Starting with the highest interest rate will help keep the amount of interest accrued down.
- Check your account statements for errors and late payment posts. Contact the creditor and request a reversal of late payments if you can prove their errors.
- Use your credit to your advantage by using and paying it off each month to build your credit history.
- Shop for better interest rates for your credit accounts. If you anticipate carrying debt for more than a year, consider transferring balances to a lower interest provider.
- Investigate if refinancing your first mortgage to a lower rate is beneficial without lengthening the loan’s term. Creditors make money on lower-rate refinancing when they can add years to the loan term.
- Vehicle and recreational item loans can be ‘snowballed’ with the lowest rate of debt paying off first and so on.
Whether you’re trying to become a millionaire or pay off your debt, determining your worth helps to measure your debt-reduction progress. Discussing your net worth at our annual meeting will help you keep on track with your financial goals. Saving is hard when debt is excessive and unmanaged. Create a debt reduction plan today.
Additional Disclosure: This article and links are being provided as a service to you. Please note that the information and opinions included are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation
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