Developing good payment habits takes discipline and sacrifice, but the rewards of faithfully paying off debt are well worth the effort. You can improve your credit score, and, with the right lender, you can even earn cash back rewards.
Track Your Spending
Do you ever get to the end of the month and wonder where all your money went? Even if you didn’t buy anything particularly expensive, you still end up with far less money than you should have?
Small expenses accumulate quickly. Your morning coffee, that trip to get ice cream, your nail appointment, the micro-purchases on apps or video games—they all add up. Before you can figure out where to trim the fat, you have to know where your money goes each month.
Try an experiment. Write down everything you spend money on for a month. Even if the expense was only a couple of dollars, write it down in a money journal. Remember, even if you only spend $3 a day on extra things, by the end of the month you’ll rack up almost $100 in unneeded expenses. $100 extra a month can make a serious dent in debt repayment.
Set a Budget
After you know where your money goes each month, set a strict budget. Start with your necessary fixed expenses: rent, mortgage payment, insurance, loan payments, childcare, etc. Next, list your necessary variable expenses: utilities, food, gas money, medical expenses, clothes, books for school, etc. Finally, list your unnecessary expenses: movies, coffee, eating out, Netflix, fun money, subscriptions, etc. You can separate these out into fixed and variable expenses if you’d like.
Obviously, your necessary fixed expenses are set, but you can take a look at the other categories. Consider cutting out some of your unnecessary costs. Do you have any subscriptions you don’t use? Can you lower your food budget by planning out meals in advance or packing a lunch to work? Could you start making your coffee at home? Make sure to leave a little wiggle room for your variable expenses, but commit to the trend of lowering them.
Keep tweaking your budget until you can get your expenses to be lower than your income. Try to put a little away in savings each month as well. This may require significant sacrifices, but it is a key part of paying down debt.
Once you create your budget, stick to it.
Pay on Time
Don’t trip at the finish line. After you’ve worked hard to track your spending, cut your expenses, and stick to a budget, don’t forget the easy part: actually making your payments.
Of course, life can get crazy, and things can slip your mind. However, you don’t want to get stuck with late fees or other penalties just because you forgot to pay.
If you can set up automatic payments, that can be a great way to ensure you never pay a late fee. If that isn’t an option, or if you usually need to do a bit of shuffling on your payment date, set a reminder on your phone, or write a reminder in your planner or calendar.
Take Advantage of the Best Cash Back Rewards
At LIFT Credit, we believe in rewarding borrowers who faithfully pay back their debt. Every time you make a payment on time, you can earn 1% cash back. Over time, your points will build up, and you can cash in those points for cash or gift cards from a list of amazing vendors.