Making a concentrated effort to pay down your existing lines of credit is one way that can help you improve your overall financial health in 2014.

Making a concentrated effort to pay down your existing lines of credit is one way that can help you improve your overall financial health in 2014.

Continuing from Six Financial Mistakes to Avoid in 2014 (Part 1), the following presents some additional tips on what you can do to improve your finances in 2014.

  • Mistake #3 Opening up too many lines of credit: With the New Year often comes a bunch of new credit offers from department stores, airlines, etc. Although some of these offers may seem appealing (because, for example, they may offer you an initial discount or some free item), it’s important that you don’t take the bait and open up a bunch of new lines of credit.

    While having a number of new lines of credit can make it very difficult for you to keep track of your monthly payments (and, as a result, increase the likelihood that you will miss a payment), it will also impact your credit score and will likely cost you a lot in the long run, as many of these lines of credit will likely be associated with high interest rates.

  • Mistake #4 – Not paying more than the minimum payment on credit cards: Instead of focusing on opening up new lines of credit in 2014, it’s a far better idea to concentrate on lowering what you owe on your existing lines of credit – or, if possible, paying off and closing some of these lines of credit entirely. The only way to pay down the principal on such lines of credit is to make a concerted effort to pay more than the monthly minimum payment on this debt. In other words, if you only pay the minimum payment on your credit cards and other debt, you will likely only be paying interest on this debt and will not be paying down the principal.

    If you have multiple lines of credit and can only focus on paying more than the minimum payment on one line of credit at a time, then choose the line of credit associated with the highest interest rate as the one to focus on paying down first. This will ultimately save you a lot of money, and it can help boost your credit rating and your overall financial health.

For the final pair of financial tips to practice in 2014, be sure to check out the upcoming Part 3 of this blog.

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