More Americans may be able to pay down their debt in 2015, due in part to today’s low gas prices. According to a report by GasBuddy, the average gas price should hover around $2.64 for 2015—a $97 billion savings vs. the $465 billion that motorists paid for gas the year before.
The American Bankers Association found that for every one-cent-per-gallon decline in gas prices, U.S. consumers save about $1 billion overall. That’s not pocket change, especially if consumers use that extra cash to pay down debts.
Along with low gas prices, the improving economy and a tighter labor market (that will hopefully push wages higher soon), will result in more consumers paying their bills on time in 2015, according to Amy Crews Cutts, chief economist at Equifax.
In addition, memories of the recent financial crisis may provide consumers extra incentive to take a different outlook on borrowing.
“I think that consumers have a new respect for debt, having been burned by the borrowing binge that led to the financial crisis,” Cutts says.
If you plan to take advantage of today’s positive market conditions and work to pay off credit card balances, student loans, or lingering medical bills, here are a few ideas to help you get started:
1. Put your extra cash in a separate account.
If you are saving money on your gas or grocery bills, think about depositing that money in a separate account or stash the cash somewhere you can’t access it. Sometimes, physically moving money can help you see how much you are saving. You can also use this account to set aside any extra income, such as a tax return, birthday money, or a work bonus.
2. Create a household budget.
It almost goes without saying that you need a budget—yet many people still don’t use one or don’t stick with one. A good way to combat this is to begin tracking your spending habits for several months. Then, use that information to estimate how much you spend on non-fixed items every month, such as entertainment and eating out.
3. Come clean about your debt.
Aside from a household budget, there’s one more spreadsheet that you need to create: a list of all of your debts. It’s important that you know how much you owe, to whom, and at what interest rate. That way, you can implement specific debt-decreasing strategies, such as paying off the debt with the highest interest rate or eliminating your smallest debt first.
4. Stop adding to your debt.
If you find yourself borrowing money to pay regular expenses, such as your water bill, you may want to look for alternative means of income, such as a second job. It may be difficult to pay off your debts if you have to use credit cards to pay your bills. Another way to save: consider moving to less-expensive living arrangements.
5. Save some cash for emergencies.
Paying off your debts can be a long process. Emergency savings will prevent an unforeseen event, such as a medical emergency or car failure, from putting you back in the red. Start putting a little money, even if it’s only $50, into an emergency savings account.
It’s good news when economic trends can help you put extra money in your pocket. Take the opportunity to knock out some debt. The satisfaction and financial confidence you could gain will likely last much longer than an extra dinner out.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.