Paying off debt isn’t easy. Otherwise, most of us wouldn’t have any. While it may sound difficult to achieve, it is possible to get yourself out of debt. Here are a few tips that will help you tackle your debt and live to tell the tale.
Make a Budget
Make a budget that tracks your income and monthly expenses. Once you have determined how much money goes to bills, your emergency fund, as well as day-to-day expenses, you can determine how much surplus cash you have to pay off debts.
Stop Adding to Your Debt
It’s hard to pay off your debt if you keep adding to it. Don’t work against yourself by going further into debt. Once you make a conscious decision to live within your means, you will start to see your debt decrease steadily.
Developing a strategy for paying off your debt is essential to reducing your debt load. First, you should rank your debt according to interest rate. This will help you identify which debt has the highest interest rate—also known as your first target. You’ll pay the minimum amount due on the debts with the lower interest rates, while any extra cash that you have available will go towards paying above the minimum on the debt with the highest interest rate. Once your most expensive debt is paid off, you’ll divert the monthly payment for that account to the debt with the next highest interest rate. You should follow this pattern until all of your debt is paid off. You will notice that as your debt decreases, the amount of money that you have to pay off your most expensive debt increases, which will allow you to pay off your remaining debts faster. This is where the term “snowball” comes from.
A balance transfer might be a good way to help you pay off your debt faster. The right credit card will allow you to reduce the interest rate on your debt, allowing you to pay less over time while paying off your debt faster. Make sure that the credit card comes with no transfer fees and does not charge interest for the first year after you open the account. Ideally, you will pay off the debt before the interest fees kick in.
Use Extra Cash to Eliminate Debt Faster
If you receive some extra cash, use it to pay off your debts instead of spending it. This applies to bonuses that you receive from your employer, cash gifts, or money that you receive from selling something, such as an old piece of furniture that you no longer need.
Keep at It
That debt that you have been itching to get rid of may seem like a lot, but with the right strategy and perseverance, you can achieve your debt-repayment goals.