Grow Your Savings: Paying Off Debt
After a long winter of bundling up and hibernating from the cold, spring is finally in full swing! Flowers are blooming and everything seems to be growing overnight— but how about your savings account? After tax season it can be hard to come back from paying in your owed contributions if you were one of those unlucky taxpayers. And conversely, it’s challenging not to burn through your tax return if you were on the other side of the deal. So how do you prepare for your upcoming summer vacation and build up that savings account? There are many ways you can add some zeros to that account, but it starts with one crucial first step: paying off your existing debt.
Pay off your existing debt, already!
Maybe you’ve been putting it off for awhile— and we don’t blame you. Paying off credit card and student loan debt isn’t necessarily a fun thing to spend your savings on, but it’s a necessary evil if you want to move toward a healthier financial future.
The Federal Trade Commission (FTC) recommends taking these steps to start paying off debt:
- Create a Budget: Start by looking at your income and existing expenses such as rent, bills, and incidentals. From there, take a closer look at where the rest of your money is going and see where you can cut down. Maybe you go out to eat most nights during the week— which is quite literally eating away your income. Try staying in and cooking dinner for 5-6 nights instead of going out so frequently.
- Work With Your Creditor: Don’t fall into further trouble with your creditor. Be proactive about your debt by talking with them directly to help you find a payment plan that works for your budget. While they might not approve a $5 contribution per month, they may be able to negotiate a lower minimum than your current rate to soften the hit your paycheck takes each month.
- Ask for Help: Figuring out a solid budget plan is no simple task! Get help from a professional accountant to help you better strategize your debt payment plan.
What should I do if a debt collector calls?
Getting a call from a debt collector can be scary— especially if you’re doing everything you can to settle your debts already. And to make matters worse, debt collectors don’t necessarily have a history of exceptional customer service and understanding. But the important thing to remember is: you have rights — whether or not you owe debt to a collector.
Know your rights
The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from harassing anyone they contact. This could include: repetitive calls that are intended to annoy or abuse, the use of profane language, violent threats, or calling without identifying themselves. If you believe a debt collector is harassing you, you can file a complaint with the Consumer Financial Protection Bureau online.
If you do not think you owe the debt they are claiming, ask for a written validation notice and follow the instructions to dispute your debt.
If you think you might owe money, still ask for a written validation notice— then work with the creditor to build out a payment plan to resolve your debts.
While it may be more exciting to put your extra cash toward your vacation fund, growing your savings starts with a clean, debt-free slate. Use these tips, and you’ll be well on your way to a more positive financial future!