Get Out of Debt Faster with These 4 Tips
Do you owe a lot of money? You might be struggling to keep up with your bills, or you may simply regard them as part of your cost of living and make a minimum payment monthly. While the latter approach might seem like a better one, that isn’t necessarily the case. Depending on the type of debt and the interest rate, making minimum payments could mean that your interest costs are ballooning. With the four tips below, you can better address the money you owe and get out of debt sooner.
Organize What You Owe
You may owe money to student loan lenders, credit card companies, medical providers and even the government. Whatever your debts are, make a list of them, how much you owe on each one, and what the interest rate is. Now you have a choice about what approach you are going to take. Are you someone who will be motivated by knocking out a few small debts quickly? If that’s the case, then you should focus most of your money on the smallest debt. On the other hand, are you worried about spiraling interest rates? If that’s the case, your focus should be on paying off the debt with the highest interest rate first.
Reduce What You Owe
What if you could reduce how much you pay without actually paying? In other words, what if you could reduce the interest rates on some of those debts? For example, you might be able to roll credit card balances onto a lower-interest card or even take out a loan to cover those costs. If you have several student loans, look into a student loan consolidation. Private lenders offer a variety of repayment terms, and they may be superior to the ones you already have. This can help you save on your monthly expenses, and you may ultimately pay less over the life of the loan.
Your Strategy
Once you have figured out the order in which you are going to pay off what you owe and made sure that you have the lowest interest rates possible, you should make minimum payments on everything except the debt you have chosen to focus on. Throw the bulk of your money at that. When it is paid off, turn your attention to the next debt and put the bulk of your money toward that. In this way, you will methodically reduce and eventually pay off everything.
Get More Money
Understanding the mechanics of how to pay off your debt isn’t everything. If you simply do not have enough money, this won’t help you. You may need to spend less or make more. The first place to look is at your budget. You may need to get an app to help you track your spending, and you may find a few places where you are spending far more than you realized. You might also be paying more than you have to for certain recurring costs, such as auto insurance or your cell phone contract. Finally, if you still need more money, consider picking up gig work or a second job, even if only for a few months, and putting everything you earn toward your bills.
