With the New Year comes the opportunity to begin your life anew with a clean slate. But what if you’re neck-deep in debt? Although it can feel overwhelming, with the right strategies and a little discipline, you can pay your loans off faster than you might think. Here are eight financial tips to help you get out of debt in the quickest way possible.
Top money-savvy hacks
Start the year right with these effective debt-cutting strategies.
1. Create a budget.
Before tackling any debt-reduction strategy, you need to know exactly how much money comes in and goes out every month. This will give you a clear picture of your finances. So first, list all your sources of income. Next, track your fixed expenses, like rent, utilities, and car payments. Then, look at your variable costs, such as groceries, dining out, and entertainment. Once you’ve discovered where your money is being spent, set some limits on discretionary spending so that more resources can be allocated towards debt repayment.
2. Use the Snowball method.
If you have multiple debts, the snowball method can be a helpful way to tackle them. This technique lets you focus on paying off your smallest loans first while making minimum payments on the rest. Afterward, you move on to the next smallest amount that you can settle, and so on. This helps you build momentum and stay motivated to clear your financial obligations.
3. Consider debt consolidation.
Consolidating several high-interest credit cards and turning them into one lower-interest loan can save you a bit more money. And this can go a long way in helping you pay off your debt faster. Don’t forget to look for a repayment term that works for your budget.
4. Use cash instead of credit.
The frequent use of credit cards can make it easy for you to overspend and get into debt in the first place. So, use cash for your everyday expenses. This can help you stick to your budget and avoid impulse purchases that you might regret later on.
5. Increase your income.
It can be a constant struggle to make ends meet and still be able to save enough to clear out your debt. So why not consider finding ways to boost your earnings? This could mean taking on a part-time job or starting a side hustle. Even small sums can add up to a substantial pile, enabling you to further cut back on your debt.
6. Prioritize payments based on the types of debts.
When it comes to repaying debts, prioritizing which ones to tackle first makes sense from both a logical and emotional standpoint. Start by focusing on high-interest debt such as credit cards or personal loans. This will typically be more expensive than lower-interest ones like student loans or mortgages. Do you have any accounts that have gone into collections or for which legal action has been initiated? Then those should be taken care of first to avoid further complications down the road.
7. Make extra payments whenever possible.
One effective way to reduce debt faster is by making additional payments when funds permit, no matter how small the amount. Every little bit adds up in the long run! If this isn’t an option due to cash flow restraints, consider transferring existing balances to another lender for a lower interest rate. Or you can take advantage of introductory offers from new creditors that won’t charge any upfront interest for a limited period of time.
8. Negotiate lower payments with creditors.
It never hurts to reach out directly to creditors and negotiate payment terms that work best for both parties. Oftentimes, they may be open to changing initial agreements since they want their money back just as much as you do!
9. Leverage bonuses and windfalls.
Have any unexpected bonuses or windfalls come your way recently? Instead of spending them, put them towards cutting down your existing debts! This could include getting an income tax refund check, winning contests or giveaways, receiving inheritance funds, etc.
10. Downsize and declutter.
Selling old items you no longer need around the house or renting out unused space via sites like Airbnb could result in some extra earnings that can go directly toward paying down those pesky bills!
11. Change career paths.
Although this suggestion might sound drastic at first glance, changing careers can sometimes lead to higher earnings. And this translates into increased funds that can be made available for debt reduction. You don’t even have to secure an actual raise within your current job title! Whether stepping foot onto a completely new professional path altogether or simply switching positions within one’s existing company, either option can bring potential benefits that spell financial freedom!
12. Get help from family and friends.
If all else fails, don’t be afraid to reach out and ask family or friends who might have some extra money available for lending purposes. Just make sure everyone agrees upon an appropriate repayment plan in advance, including any interest rates, if applicable.
13. Avoid future debt.
Once you’ve paid off your loans, it’s important to avoid falling back into old habits. Be mindful of your spending and continue to live within your means. Consider setting up an emergency fund to help you avoid taking on new debt if unexpected expenses arise.
14. Stay motivated.
Settling all your debts can be a long and challenging journey, but staying motivated and focused on your goal is essential. Celebrate your progress along the way, even if it’s just paying off a small debt. Consider creating a visual reminder of your progress, like a chart or graph, to keep you on track.
The bottom line
Although paying off debt isn’t always easy, following the tips we shared can help you clear a speedy path toward financial independence. With enough dedication and smart money-management strategies, you can settle your loans for a debt-free existence. So go ahead—don’t let anything stand between you and your best life! For more money-savvy hacks, visit the blog of VACA20 today!