10 Easy Ways to Pay Off Debt
Are you struggling to pay off your debts? If so, you're not alone. According to a report from the Federal Reserve, as of 2021, American households collectively owe more than $15.8 trillion in debt.
While there are plenty of methods to help you pay it down, the truth is that it's hard to get started. It doesn't matter whether you have 50k in student loans or 30k on credit card balances— the number one thing holding us back is that we don't know where to begin.
Debt is not something that should make you think about giving up on your dreams. It is something that can be overcome with a little bit of effort and determination.
While there are many ways to tackle this problem, here are 10 easy tips that can help you get started with debt consolidation.
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1. Create a budget and stick to it
The first step to pay off debt is creating a budget. You'll need to figure out how much money you have coming in and going out every month.
This will help you create a plan for how much you can pay toward your debt each month. Once you have a budget in place, it's important to stick to it.
Read more: How to create a budget and stick with it
This means making choices about where you spend your money and being mindful of unnecessary purchases. It can be difficult to stick to a budget, but it is worth it if it helps your debt repayment.
If you're struggling to stick with your budget, there are lots of resources and support available to help you. You don't have to go through this process alone.
2. Make extra payments on your highest interest rate
If you're carrying debts, making extra efforts on your high-interest rate ones should be a top priority to pay down debt.
By doing so, you'll save money on interest and pay off your debts more quickly. For example, let's say you have two debts: a $5,000 balance on a credit card with a 15% APR, and a $10,000 student loan with a 5% APR.
If you make the minimum repayment on each debt every month, it will take you almost 6 years to pay off the credit card debt and just over 10 years to pay off the student loan.
But if you make an extra $100 monthly payment towards the credit card, you'll pay it off in just over 3 years.
And if you make an extra $50 payment towards the student loan each month, you'll pay it off in just under 9 years. So, by making extra payments on your high-interest debt, you can save time and money. This debt repayment strategy is known as the debt avalanche method.
In contrast, the debt snowball method strategy focuses on monthly payments toward the smallest debt first. Once the debt with the smallest balance is cleared, that money goes towards the next smallest debt, and so on.
If you struggle to find a way to increase the minimum payment, need guidance with debt consolidation, or want to reduce the loans you owe, you can discuss these 2 strategies (debt avalanche and debt snowball method) with a Certified Financial Planner (CFP); you can also get in touch with The Credit Pros.
3. Negotiate with your creditors
It's important to reach out to your creditors and try to negotiate a personal payment plan. Many creditors are willing to work with you to help you get back on track. It is not in their interest to watch their clients struggling to pay off debt or unable to afford the minimum when paying credit cards debts for example.
Often, you can negotiate a lower interest rate or a longer repayment plan.
If you're not sure how to approach the negotiation, consider seeking out the services of a financial advisor. They can help you formulate a plan and negotiate on your behalf. No matter how much you owe, your principal aim here is to tackle your debt first.
Remember, the goal is to avoid defaulting on your debt, which can have serious consequences for your credit scores, your finances, and your life in general.
4. Use a balance transfer credit card
By transferring your balance to a new card with a lower interest rate, you can save money on interest and accelerate the process of paying off debts.
When choosing a balance transfer credit card, be sure to compare offers from multiple issuers to find the card that best meets your needs.
Once you've found the right card, simply complete the balance transfer and start working towards becoming debt-free. Be aware though, that for several people who found themselves with monetary difficulties at some point in their life, it often started with credit card debt. The highest interest rate is your enemy, even if it comes with free Airmiles, insurance, or other perks.
5. Cut back on unnecessary expenses
You need to cut back on unnecessary spending and focus on building up your savings. It's important to be mindful of your expenses, and only purchase what you need. When shopping, clever marketing strategies may tempt you with something free, but you usually end up paying toward it, one way or another!
Similarly, review your bills and insurance policies, to make sure they are in line with the minimum amount you can put toward paying each month.
Make a budget and stick to it.
Track your progress over time, and make adjustments as necessary. Again, don't be afraid to ask for help from a financial advisor if you're having difficulty getting out of debt.
They can help you create a personalized plan that fits your unique situation. With dedication, perseverance, and a solid debt repayment arrangement, you can get out of debts and start fresh.
6. Get a side hustle
You're not alone if you're struggling to pay off debt.
The average American household has more than $96,000 in debt, including mortgage debt. Housing is the principal spending for most.
Luckily, there are things you can do to ease the burden. One option is to start a side hustle.
A side hustle is a way to make extra money outside of your full-time job. You can use this extra cash to accelerate paying off debt; and eventually accumulate saving too.
There are many different types of ventures you can start, so it's important to choose one that fits your principal interests and skill set. Even if you can only allocate it minimum time, it should pay off.
For example, if you're a great writer, you could start a blog or become a freelance writer…
If you're good with numbers, you could become a virtual assistant or accountant...
If you like working with your hands, you could start a home improvement business or offer pet-sitting services.
The possibilities and strategies are endless!
Getting paid for practicing a hobby will feel great! Once in a while, don't feel guilty spending this extra income on your loved ones.
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Lastly, if you want to learn a new skill, to then sell your services, Learn from Fiverr can help too!
7. Sell some of your belongings online or at a garage sale
Getting rid of debt can feel like a never-ending battle.
You work hard to make ends meet, but it seems like as soon as you get ahead, something comes up, like a huge bill to be paid, and you're back to square one.
If you're looking for a way to give yourself a fresh start, consider selling some of your belongings online or at a garage sale.
This is another good way to make some extra money that you can put towards your debt.
Not only will this help you to get rid of debt, but it will also declutter your home and give you a sense of freedom.
8. Put your money into a high-yield saving account or CD
One of the best things you can do is to invest your money in a high-yield savings account or CD. This will help you to earn interest, which can then be used to pay off your debt.
In addition, by investing your money in a high-yield account, you'll be able to grow your savings over time, which can then be used to create an emergency fund or to invest in other financial goals.
Check out How Much Cash Should I Have On Hand?
9. Make lump sum payments whenever you can afford it
While making your regular monthly repayment(s) is important, lump sum reimbursements can help you get out of debt faster.
Lump sum payments go straight to the principal balance of your debt, which means that you will accrue less interest over time.
In addition, lump sum payments can help improve your credit score by decreasing your credit utilization ratio. When it comes to getting out of debt, every little bit helps.
10. Seek professional help for debt payoff
It's not uncommon to find yourself in a situation where you have more debt than you can handle.
Maybe your spending got a little out of hand and you charged too much on your credit cards, or you took out a loan to buy a car or a house and then found yourself unable to make the payments.
If you find yourself in this situation, it's important to seek professional help.
A qualified credit counselor can help you develop a plan to pay off your debt and get your finances back on track.
They can also negotiate with your creditors to lower your interest rates or extend your payments. And if you have a lot of debt, they can even help you file for bankruptcy - the absolute worst-case scenario.
You can also read: The Ultimate Guide to Student Loans With No Interest
Final words on paying off debt
So, there you have it – 10 easy ways for paying off debt. All of these tips are tried and tested, so why not give them a go?
No one likes borrowing money to pay for things, but sometimes it's the only option, whether that means going into a store credit card or taking out a loan. Hold yourself accountable and pay back borrowed money as soon as possible. Not only will you be able to get back on your feet quickly, but you'll also gain valuable experience in managing your finances along the way. After all, debt doesn't disappear just because you ignore it - take control of your ability to borrow money before it takes control of you!
Contributor: Akhlaq Mushtaq Qureshi
EXTRA: 11. The Credit Pros
The Credit Pros, ranked by Inc. Magazine as one of America’s 5,000 fastest-growing companies 6 years running, is a financial technology firm dedicated to educating their clients on how to avoid credit-oriented mistakes in the future.
The Credit Pros will help you identify personal damaging inaccuracies on your credit and get them removed! They provide practical, honest credit advice when you need it and give you credit education tools so you understand your credit scores.
The Credit Pros is committed to quality, achieving results, and providing “5-star level” client support. Their promise:
- That you can cancel your service at any time
- That no one will over-promise or guarantee a specific outcome
- That your private information will be protected and secure
- That you will be treated professionally and courteously
- That all of your requests will be responded to in a timely manner
EXTRA: 12. SuperMoney
SuperMoney helps people compare financial services. To date, they’ve helped millions of people shop for loans, investments, and other products. SuperMoney partners with the world’s leading banks, insurance, and principal financial service companies to empower consumers with a KAYAK-like comparison shopping experience - great tools when you need to keep cash in line.
Pecuniary decisions can be stressful; SuperMoney makes them easy and puts you in charge.
Financial comparison shopping. You wouldn’t book a flight without comparing options, would you? Why should shopping for monetary services be any different? SuperMoney makes financial comparison shopping easy. Compare rates, terms, and features on thousands of products and services in one place. Life insurance or loans, use their tools and you've got yourself another strategy to keep your bills and balances low.
No Financial Advice. This article does not provide financial advice and has been prepared without taking into account any person’s investment objectives, financial situation, or particular needs.
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