In late 2017, Americans had an all-time high outstanding debt total of $13.1 trillion. Experts also estimate that “student loan balances soared by 146%” in the last 10 years, and that roughly 80% of Americans are in debt. If you are one of the millions of people who find themselves under a mountain of student loan, credit card, or personal loan debt, you’re not alone. As a result of the level of debt that most individuals carry, many are delaying the process of making big life purchases (e.g. homes, cars). However, there are many instances in which big purchases are not completely avoidable.
Need to make a big purchase while in debt? Explore three expert strategies to make your goals a reality:
Figure out where your money is going:
Having a large amount of debt doesn’t mean that you can’t make big purchases. Although you have to be more strategic in your approach, there is almost always a way to find the funds you need. The first (and most crucial) step that you should take, is to find out where your money is going. In other words, it’s time to create a budget (if you haven’t done so already). One study recently revealed that “only 41% of Americans use a budget.” While many people see a budget as something that is restrictive, it will actually show you how much money you have leftover after paying your bills. This enables you to know how much money you have to put aside toward your big purchase.
Make a savings plan (if possible):
The best strategy for making a big purchase while in debt is to not add more of it. Rather than applying for another credit card or loan right away, see what you can do to save up for the item that you need. Since you’ve already made a budget, you should know exactly how much you can set aside each week. If your finances and timing allow, create a savings goal and an estimated date for when you plan to reasonably reach that milestone. Depending on the urgency of the big purchase you’ll be making, see how long you can go without in order to avoid further debt.
Quickly clean up your credit if you will need financing:
Need to make a big purchase right away? Whether you have to find a replacement car or appliance, you may not be able to pay off all of your existing debt before going into more debt. What should you do if this is the case? Prior to making the purchase, do whatever you can to quickly clean up your credit. Experts recommend paying down your revolving credit balances as much as possible, looking for and disputing any errors on your credit report, and continuing to make all payments on time. Any boost to your credit score (and reduction of your current debt) will give you the best chance of getting approved for a new loan, and for receiving a low interest rate.
Although it can seem daunting, making a big purchase while in debt is possible. Utilizing the tips listed above will help you reduce the impact to your current financial situation, and assist you in achieving your goal.
Featured Image By: Unsplash