Before you get started, be sure to read Part One of our 10 Steps to Financial Success blog series. And check back for the final steps soon!
Step 6 – Delete Your Debt
Now that you’re paying yourself first by setting aside money for savings, another important part of money management should be your next priority. You’re ready to take Step 6, which is deleting your debt. Whether it’s credit card interest, a car loan, a home mortgage, college or a payday loan, if you can cut your debt even a little bit, it will benefit every other part of your finances and your life. The following are just a few approaches for managing debt:
- If you find it difficult to manage your credit card debt, then you may need to try living a cash-only lifestyle.
- Consider limiting online purchases. Driving to a store and walking through it gives you more time to consider if what you’re looking for is something you could do without.
- Note that for certain circumstances there are some lenders that may be willing to work with you to reduce the amount of interest on your debt. It’s worth contacting them to explore if this is possible. Keep in mind that Delta Community offers competitive rates to qualified borrowers.
- If you can, increase debt payments, paying a bit more each month on your credit card interest or loan payment.
- If you can sacrifice some material goods and/or activities, then aggressively repay your
most expensive debts that are holding you back financially.
Step 7 – Buy a Home
This next step involves a major life event, but it’s not an activity that may be available or is appropriate for everyone. What is this big step? It’s buying a home—such as a house, townhouse, or condominium. There are well-known benefits to buying home; the first is that it generally is considered an investment, as real estate often—but not always—increases in value over time.
Another advantage to home ownership is that current U.S. federal tax regulations may allow you to deduct the interest you pay on your mortgage from your income taxes. This annual deduction is a terrific way to lower your taxes, but always keep in mind that tax laws change and we can’t know how those changes could affect this deduction.
We’ve discussed some of the advantages of home ownership, but why isn’t it right for everyone? Honestly, it’s simply not affordable for a lot of people. Prospective homeowners also need to think through their career and lifestyle factors such as job security, where they want to live, getting married, and starting a family before committing to buying a home.
Step 8 – Consider Investing and Diversifying Your Investments
An important part of managing your household finances is determining if—and then how—you invest your money. As with any investment, there are financial risks to investing, and they should be investigated and considered thoroughly. You may want to enlist the help of an investment professional to discuss your potential investment choices and their risks.