Across New Hampshire and the nation, Americans are making (and breaking) resolutions this new year. At the same time, our country is coming out of a recession, yet consumers are still struggling with debt. The average household currently owes approximately $6,700 in credit card debt, and Americans as a whole have defaulted on $176 billion in debt since 2010. In the spirit of making a fresh start for 2014, consumers may wish to get control of their debt and set themselves up for better financial success.
Perhaps the main goal of any consumer should be to keep a budget and track expenses. According to the National Foundation for Credit Counseling, only 40 percent of American adults actually do this now. Regardless of how the budgeting is done, it allows consumers to look at their spending habits and see where cuts can be made. Once this has been done, it may be beneficial for consumers to set up an emergency fund in case of an unexpected financial hardship. Some in the financial industry recommend saving up enough to cover a year’s worth of expenses.
Coming up with a plan to pay down debt is also important, and many choose to use the snowball method. This involves paying the most toward the debt with the highest interest first, while paying the minimum payments on the others. Once that debt is paid off, the extra money can be applied toward the debt with the second highest interest and so on.
Taking these steps can mean some extra money in the bank and a better credit score for many New Hampshire residents. However, despite their best intentions, many will continue to struggle with debt. If that happens, they may find it beneficial to learn more about their options for debt relief. In some cases, bankruptcy may offer the best chance for a fresh start by either discharging the debt or establishing a court-approved payment plan.
Source: The Huffington Post, The 4 Resolutions Every Indebted Consumer Should Make in 2014, Odysseas Papadimitriou, Jan. 13, 2014