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Why Now is the Right Time to Pay Down Debt

pay down debtWe’re already well into 2018, and some of our New Year’s resolutions may have been put on the back burner. If paying down your debt was one of your must-do proposals – revisit that ASAP. Why the urgency you may be asking? The start of February was marked by a dramatic price correction in equities markets around the world. Nothing surprising there. What is surprising is the reasoning behind the sudden selloff on the Dow Jones, NASDAQ, and S&P 500.

Rising inflation, brought about by a sudden uptick in wages, and improved economic performance. The stock market is a funny old thing, and even if Main Street has little knowledge of the complex mechanics thereof, there is a lesson to be learned here. That lesson is as follows: when speculators pull their money from equities and put it into bonds, gold and other safe-haven assets, something big may be on the horizon.

Watch the Feds

At this point in time we’re staring down the barrel of yet another interest rate hike. According to the CME Group FedWatch tool, there is a 77.5% probability of a rate hike on Wednesday, 21 March 2018. All this financial jargon may go over the top of our heads, but it shouldn’t. If another interest rate hike is approved by the Fed FOMC, the federal funds rate will rise by 25-basis points in the region of 1.50% – 1.75%.

Note that the Fed has been tightening monetary policy since December 2015. The rate hike is great if you have money socked away in an interest-bearing account, but not so good if you have high levels of outstanding debt. The folks may be wondering how it is possible to pay down credit card debt before the next rate hike, or a successive series of rate hikes in 2018. Fortunately, here are 4 quick ways to get on top of things before the debt becomes too excessive:

Target Your Most Expensive Credit Card Debt First

If we’ve learned anything about debt, it is this. It grows and grows. By focusing your efforts on the highest interest-related debt, you will be paying down your biggest debt burden first. Low-interest debt is less of a concern.

Think Outside the Box When Paying down Debt

If you are ready to pay down debt, why settle for high interest repayments on your debt obligations? Consolidate your debts such as credit cards, personal loans, short-term loans or other loans into a figure that you can understand. Too many debts all over the place are difficult to manage. If you consolidate debt, you know exactly how much you owe at any time. Now, apply for a debt consolidation loan at a lower interest rate than the interest being charged on your credit cards or other lines of credit. This is intelligent debt management strategy.

Be Bold – Put Your Credit Cards on Ice

Take it whichever way you want – literally or metaphorically. But put your credit cards on ice for sure so you can stop using them.

Prioritize Your Expenses and Trim the Fat

Yes this is a reference to setting a budget, sticking to it, and being financially responsible. If your credit card bills are difficult to pay down, check to see if you have unnecessary debit orders going through. These include things like magazine subscriptions, Netflix subscriptions, home land lines, gym memberships that you don’t use, and annual payments to the quack fortune teller on the street corner. In fact, any and all unnecessary leakages from your bank account should be considered.

These are but a handful of the many effective techniques that you can employ to reduce your debt burden. Be bold, be brave, and take concrete steps to pay down your debts so that you can live a stress-free life.

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Kayla is a mid-20s single girl living in the Midwest, USA. She is focused on paying off her consumer and student loans, while simplifying her life and closet. You can join her on her journey at ShoeaholicNoMore or follow her on Twitter.

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