It’s already April and I can not believe how quickly the year is going. I was inspired by accomplishing one of my 2010 financial goals and consolidating my student loans. The process of actually doing it took about 15-20 minutes. Even though it was something quick, it will have a big impact on our finances.
I realize as I was doing my net worth review, that now would be a good time to jump start a goal and motivate others. It’s not too late to get started on your goals and I think this month would be great to attack debt. I think that focusing on one financial goal a month is completely doable and I hope you can join in.
If you’re looking for specific ways to reduce and eliminate debt, check out the plan I’m working on now.
How Paying Off Debt Boosts You
By paying off a debt, you’reachieving a goal that many people struggle with nowadays. You accomplished something that will improve your monthly cash flow, which in turn puts more money into your pocket.
Paying off one debt in a month can give you relatively instant gratification. Let;s admit it, instant gratification has been a factor of getting into debt. Because I felt as I had to have it, I spent my credit cards on a lot of stuff. I’d like to try an use some positive reinforcement. If you can knock out your credit card debt in a month, that’s great, but even something smaller will motivate.
Paying back the money you owe your friend or family member lifts a weight off. I agree with Dave Ramsey that being in debt to family or friends can really strain the relationship. Perhaps now is the month you take care of that and build your confidence.
How Paying Off Debt Increases Your Credit Score
Did you know how much your debt affects your credit score? Did you know paying it back can significantly improve it too? Here are some ways in which your credit score is based on how your handle and eliminate debt.
Debt Payment History: The biggest factor in determining (and improving) your credit score is your debt payment history (35%). Do you pay all your credit card bill and car loan payments on time? Having a late or missed payment on your credit report can have a big negative impact on your score. Use online bill pay to automate your debts and eliminate late payments.
Debt to income: Your credit score also consider how much debt you have with your income. This is why eliminating even one small debt this month can be helpful.
Amount of available credit: Believe it or not, approximately 30% of your credit score is based on your available credit. If maxed out or closed to maxed out on your credit cards, you need to quickly get into financial shape.
Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..