Being in even a small amount of debt can keep you up at night. Paying off debt is a simple task, but it can take a long time and a lot of discipline. Once you realize you have a debt problem it’s often too late to resolve it quickly. With time and effort though, you can eliminate debt and strengthen your finances for the long run. The whole process will make you a stronger person as well..
Use this quick, effective plan to begin eliminating debt today:
1. Identify a starting point
Many people have no idea how much debt they actually have. They make minimum payments each month but don’t notice their balance growing over time. Get out all of your account statements and make a comprehensive list. Be sure to include the interest rate.
2. Cut expenses
Cancel any subscription services you don’t absolutely need. Curb any new purchases that aren’t necessities. Tighten the purse strings to eliminate all unnecessary spending across the board. Put all your excess capital after necessities toward your debt. As far as necessities go, try to get a better deal or find coupons to reduce the cost. Get fresh quotes for all of your insurance policies and shop around. Find coupons and shop sales.
3. Try to get a lower rate on your credit cards
Many people would be surprised, but many credit card companies will lower your rate if you simply ask. Even a change of just a couple percentage points can add up to a lot of savings in interest on a large debt.
4. Consider balance transfer offers
Credit card companies offer big interest rate discounts to customers willing to transfer a balance to their company. The catch is that after a certain amount of time, the rate goes way, way up. Be sure that you can pay off the balance during the introductory rate period, usually 6-18 months, to avoid a big interest penalty down the road.
5. Rank your debts by priority
Start by putting all available funds toward the smallest debt and make the minimum payment on everything else. When the smallest debt is paid off move on to the next in line. This method works well because you see progress more quickly with each small “win” and the momentum builds up like a snowball as you pay off all the debt. Alternatively, you could start by paying off the debt with the highest interest rate first. This method will realize the greatest savings along the way.
6. Don’t make a bad situation worse
It is imperative to not create additional debt. Until your financial house is in order, leave the credit cards at home when you go out. Most people pay off debt so that they can start spending again. Don’t make this mistake!
7. Sell unwanted items
If you’re not using them, chances are someone else can. Sell these items and put the proceeds toward paying off your debt. If the items were bought with debt, remember the feeling of selling it for pennies on the dollar in order to pay back the lender. It hurts, doesn’t it?
8. Stay motivated
Think about how great being debt-free will be. It can be easy to lose enthusiasm while you’re home eating Ramen noodles on a Saturday night while your friends are out on the town. Keep the future in mind and stay the course.
9. Avoid repeating your mistakes
Once you achieve debt freedom, keep it that way. It’s easy to fall into old habits and end up back where you started. Remember how difficult your journey to debt freedom was and vow to never go back.
Get started taking back your financial future right away. Excessive debt can destroy your life over time. Regain control and maintain it in the future.