Many people would love to pay down their debt or get rid of it altogether, but they aren’t quite sure of the best way to do it. So here are a number of suggestions to get you started.
1. Pay More Than the Minimum
Make sure that you always pay more than your minimum payments. If you only make your minimum payments each month, it can take forever to pay off your balance. If you want to pay off your balance quickly, pay as much extra as you can afford.
2. Spend Less Than You Plan to Spend
“You can have almost anything you want; you just can’t afford everything you want.” Many people get into debt and stay in debt because they tend to buy what they want, when they want.
If you want something, don’t buy it unless you have the money. If you can be satisfied with less than you would ideally want, even temporarily, you can use the money you save to pay down your debt.
3. Pay Off Your Most Expensive Debts First
One of the smartest strategies for getting out of debt is to make minimum payments on all of your debts and credit cards except for one. Chose the one debt that is charging you the most interest and focus all of your extra payments on paying that one off first.
This strategy, sometimes referred to as the snowball method, will get you out of debt quickly, and you will feel encouraged as you see your progress.
4. Get a Second Job and Pay Down Your Debt Aggressively
Getting a second job, or consistently picking up an extra shift or two, is a common way for many people to pay down their debt. This doesn’t work for everyone, but if you can make it work, you could be debt free within a short number of years.
For this to work, you must apply all of your extra income to debt repayment. Working the extra shifts or hours also doesn’t need to be permanent. Once your debts are paid off, you can look at scaling back again.
5. Track Your Spending and Identify Areas to Cut Back
For some people, doing this can save them almost as much money as working a part time job. You won’t know how much you can save unless you give this a try. Once you know your spending habits, you should be able to identify areas where you can cut back. Allocate the money you “find” to paying down your debts.R
6. Create a Spending Plan
Ok, so the “b” word has to fit in at some point. In truth, a budget is just a spending plan. It will help you stay on the straight and narrow with your current debt payments, or your new accelerated payments. A spending plan is something you lay out to make sure that you are spending less than you earn.
Some people say that they don’t like budgets, but have these people ever tried one? Better yet, if you’ve lived all this time without a budget, how do you know you won’t like having one? After trying a realistic budget on for size, most people agree that the alternative—being in debt—is much worse.