American debt in 2021 neared $15 trillion dollars. The good news- you’re not alone. The bad news- that’s a lot of debt!
There are many proven tactics to minimize debt accumulation and pay off your existing debts. Your debt shouldn’t hold you back from experiencing your best life.
Debt should only be considered when there is an expected return that will end up being greaterthan the debt itself. Take for example a mortgage, business loan, or student loan. No matter the amount or source of your debt, the five tips listed in this guide will help you pay off debt!
1. Knowledge Is Power
There are so many people who don’t even know what they owe. Fear prevents them from looking at bills, just amounting to late fees and interest accumulation.
The first step in managing your debt repayment is knowing what you owe. Use a debt calculator to compile your debts. The numbers might be scary, but you can create a plan to manage them month to month.
If your financial situation changes, know how you can freeze or reduce debts. Have a payment plan and have a backup plan.
There are two methods of prioritizing debts. The first is called the snowball method. This method focuses on paying the smallest debt first, then proceeding to the larger debts.
The second method is the avalanche. With an avalanche method, you pay the debt with the highest interest rate first. With both methods, you still pay off your other debts. The thing that changes is the order in which you prioritize payments.
Don’t agree to anything until you’ve read the fine print and researched all the options. Think of how many banks, credit cards, and lenders there are out there. They all have different policies, interest rates, and grace periods.
Who you choose to borrow from matters. Ask your friends and family about their experiences. Look into rates and payment rules for credit cards. If you have student debt, do some research about the pros and cons of refinancing student loans. This could be of great help to pay them sooner.
4. Manage Spending
Existing debt is already a huge load of stress. You have to find the balance between enjoying what you love and not adding more financial stress.
A short moment of bliss might be worth it. Or it might compile your dues for the month and make living tight.
The best way to manage your spending is to create a budget. Create one based on your monthly earnings, debts, savings goals, and spending goals.
5. Get Creative
Debt can take a long time to pay off. There is no fast shortcut, but you can pay it off faster with supplemental income. Start a side business, crowdfund, sell old items, or freelance. For instance, you can even make extra money with your car to boost your savings.
There are many creative outlets that might just help you pay off debt too.
Pay Off Debt for Good
Follow the five steps above and you’ll quickly start chipping away at those stubborn debts. The best way to pay off debt fast is to be consistent.
Create a debt repayment plan and continually analyze it. Soon, your debt will be gone before you realize it. For more debt tips, continue reading on our blog!