Is 2014 Your Last Chance to Get Out of Debt?
Happy Monday, friends! Or, maybe not, depending on what your debt situation is. Last week Yahoo Finance ran an article called Why 2014 is The Year to Get Out of Debt. I’m reading pretty much everything I can these days that might provide new insight on how to get out of debt, so this article piqued my interest. In it, the author talks about a few things that might change the game for borrowers in 2015:
1. A rising prime rate. Experts are saying that our relatively stable prime rate of 3.25% has a good chance of going higher in 2015 and/or subsequent years. This would mean rising interest rates on variable loans, such as credit cards, which could make it even more difficult to get those cards paid off, especially if you’ve got lots of card debt.
2. The end of the QE gravy train. The rumor is that QE is definitely coming to an end soon, which will again result in rising interest rates for consumers. 5% on a 30-year mortgage is nothing to sneeze at, but it’s much, much higher than the 3.50% we enjoyed for so long, and will definitely affect consumers’ decisions when it comes to buying a house. It will also, like the incident of the rising prime rate, affect current and future borrowers’ interest loan rates, especially if they’re not fixed rates.
3. The trickle-down effect. If rates do rise, people will obviously be spending less as they realize that collectively and individually, there’s just not as much money to be had. This could lead to less spending, job layoffs, serious financial woes, and all of the other fun stuff we dealt with in 2008.
So, if the predictions are true, what does that mean for those of us still carrying a heavy consumer debt load or variable mortgage interest rate? It means we’d better step it up a notch or twelve and get our debt gone or else transferred into something more fixed, ASAP. What can you do now to get out of debt if “this is us”?
Funnel More Cash Toward the Debt
Increase your income by working overtime, taking on some side hustles, asking for a raise or searching for a higher paying job. You could also sell all of that stuff laying around the house that you haven’t used in a hundred years.
Decrease your spending by paring down your budget and getting rid of most, or all, unnecessary expenses.
Transfer or Consolidate
Get rid of variable loans by refinancing that mortgage you won’t be able to pay off for another 5-10 years. Get a fixed rate on your credit card and variable loan balances by consolidating them at your bank and/or lending club.
Save, Save, Save
Start squirreling away at least something for an emergency fund. Have extra cash on hand to cover any potential situations that could be created if 2015 does turn out to cause major financial trouble. Yes, you need to work harder to get out of debt, but at the same time, save at least a little for emergencies that may come up in the future.
2015 may or may not bring an economic apocalypse to the country/world, but I for one don’t want to be caught in a bind if it does.
What do you think: Are we headed for financial trouble in 2015?