Paid for by Discover® Personal Loans:
Paying down debt can sometimes feel like an endless journey. Even when you pay bills each month, it may feel like the balance never really decreases. It can feel like the only way you might ever pay down the balance is if something major, like a windfall of money or a raise, occurs in your life.
But there are ways to pay down your balance and build wealth — no new job or side hustle required. Here are tips on how to get financially unstuck and regain the stability to build wealth.
1. Pinpoint lifestyle creep
In order to get where you want to be, you first have to know where you are now. And this includes taking inventory of your current spending habits. One frequent cause of “missing money” is a phenomenon known as “lifestyle creep.” This is when, without you noticing, your expenses increase over time. For example, maybe pre-pandemic, you only got takeout once a month. Now, it’s more like once or twice a week. While it’s quick and convenient, habits like this can gradually throw off your budget.
“The best way to avoid lifestyle creep is to set financial goals and then regularly check in on your spending and budget,” explains Matt Lattman, vice president of Discover Personal Loans. “This helps you make sure you’re following up with your plan, adjusting as necessary and tracking progress toward your goals. If it helps, create a ritual that works for you, like taking yourself out for coffee, so that once a month you make dedicated time and space to focus on your finances.”
2. Set your financial goals
Next, figure out what your goals are. Is it to pay down certain credit cards or build an emergency fund? From there, get granular about how you might achieve these goals: by trimming an extra $100 each month from your budget, for example, or by saving a certain percentage of your paycheck. “You may already have long-term goals in mind, like saving for retirement or setting aside money each month to build an emergency fund. Short-term goals are important, too, such as having enough for an extra dinner out each month, being able to pay down some debt earlier, or increasing your 401(k) contribution,” Lattman suggests.
Once you have your goals in mind, assess what you earn and what you owe. This will help you make a specific plan to get where you want to be.
3. Assess interest on loans and credit cards