8 Tips to Help You Pay Off DebtPublished on September 25, 2020 by Daniel Azzoli
Debt can sometimes feel like a crippling part of life. Maybe you take out a loan here, make a few extra purchases on your credit card there, and next thing you know, you’re swimming in debt without any idea of how you got there. While debt may not be an inherently bad thing, not handling it responsibly can get you into trouble.
So, if you’re drowning in debt and wondering how you’re going to get out of the situation you’ve found yourself in, know that you’re not alone and that there are things you can do that may help to ease the burden.
Before you start to look for ways to pay off debt, it’s important to figure out what kind of debt you’re dealing with. You may have debt from student loans, credit cards, your mortgage, and more. Then, you’ll need to get a clear idea of exactly how much debt you’re in. Having clear insight into these two factors can help you tailor your debt solutions to your particular situation. Now, let’s dive into some ways for you to start paying off your debt!
1. Use Your Budget Effectively
Once you have an idea of what kind of debt you have and how much of it there is, the next step is to get your budget in order. If you already have an effective budget tailored to your financial situation, then you’re going to want to go over it thoroughly and see where things went wrong. Next, you’ll need to incorporate your debt repayment into your budget to stay on top of your payments.
But what if you’re in this position in the first place because you don’t have a budget? Well, then you’re going to have to create one! There are all sorts of different budgeting techniques out there, so you’ll have to do some research to determine what works best for you. For example, if you have to account for the expenses of an entire family, a family budget may work best for you. If you think using only cash would help regulate your spending, you may want to try out an envelope budget.
You can also look into apps like Mint which can help you to build a budget. Just make sure to review your spending regularly and cut costs where you can. Your budget can be a great tool to help with debt elimination, so make sure you’re using it.
2. Pay More Than the Minimum
With certain types of debt – usually revolving debt like credit cards and lines of credit – you may have the option to make minimum payments each billing cycle. This is the minimum amount of money you’d need to pay to keep your account in good standing. While it can be a useful feature in some situations, if you want to make a substantial impact, you’ll want to try to pay more than the minimum when you can. The less you pay each cycle, the longer the debt drags out and the more you may end up paying in interest or in other charges that may accrue over time. While you may not have a ton of extra room in your budget, try your best to commit to paying off more than the bare minimum.
3. Focus on Your Debt with the Highest Interest Rates
Of all the debt you have, the ones with the highest interest rates may be the ones that are costing you the most, so it might make the most sense to deal with those ones first. Start by listing out all of the revolving debt you have and put it in order of highest to lowest interest rates. Then start chipping away at the highest on your list first, while meeting at least the minimum payments of all your other accounts.
4. Pause Your Credit Card Spending
If you’re having a problem with debt, the last thing you want to do is build up more of it needlessly. But for some people, the temptation of spending can be hard to fight. So, how do you deal with that temptation? One way can be to remove the option altogether.
Go through your wallet and take out all your credit cards before you leave your home to go shopping. You might worry that you’ll miss out on some of the perks that come with your credit cards, like cash back or air miles, but the negatives of building up more debt likely outweigh the positives of earning these rewards. Don’t start using your credit cards again until you feel like you have your debt situation under control.
You might run in to a couple of issues with this tactic, the first being that the worry of building more debt isn’t strong enough to keep you from retrieving your credit cards from whatever drawer you’ve hidden them in. If you think you’re going to run into this problem, give your credit cards to a family member or friend you know you can trust to hold on to them.
The other issue you may run into is online shopping. While it may be convenient to have your credit card information saved on sites you shop at frequently, it also makes it a lot easier to spend your money. If you do a lot of online shopping, clear all of your info from these sites. If you’re paying for certain bills through your credit card on a recurring basis, switch to paying with a debit card instead. While these things may not actually help you pay off debt, they can help you from accumulating more while you recover financially.
5. Put Cash Windfalls Towards Debt
Whether it’s your tax refund, a bonus from work, or a gift from a family member, it’s always helpful to get a windfall of cash. The important thing is to use it responsibly. Instead of blowing that money on a shopping spree or an expensive vacation, put it to better use by paying off debt. While it may be tempting to use it on something fun, it can be a great opportunity to make a huge dent in your outstanding debt.
6. Find Ways to Save Money
Like we mentioned earlier, when you’re trying to pay off debt, it’s important to review your budget. Firstly, you want to see if there are any obvious red flags in terms of your spending, and then you’ll want to look for ways to save some money. But the idea of saving money may sound daunting when you’re already living on a tight budget.
You’re going to need to be thoughtful and mindful about this process, and also resign yourself to the fact that you may need to make some sacrifices. Some things that you may be able to do to help you save money include:
- Not spending more than you make.
- Paying yourself first.
- Focusing on saving small amounts.
- Automating the process.
If you want to read about these in more detail, take a look at our beginner’s guide on how to save money.
7. Get Rid of Unused Items and Use Profits Wisely
Another way to find a little extra money to go towards your debt payments is to go through your house and sell any items you don’t use, but that are still functional. To start this process, go through the following steps:
- Start by making a list of everything you want to sell.
- Research these items online to figure out what a fair price is.
- Take great pictures, write eye-catching headlines, and write concise descriptions.
- Post these items in different online spaces like Craigslist and eBay Inc.
When you start to see money come in from these sales, you can use it to help you pay off debt.
8. Be More Financially Responsible
There could be a number of different reasons why you’ve found yourself mired in debt. While sometimes things may take an unexpected turn and you have no choice but to bail yourself out with a loan, in other instances, you may just end up in debt because you’ve managed your money poorly.
If this is the case, put some time and effort into thinking about how you typically spend your money each day, week, and month. Ask yourself if some of these purchases are really necessary, or if you can do without them. Do you need to get a pricey coffee every morning, or would you be happy making your own at home? Can you start making lunch ahead of time to bring to work, or do you really need to eat out for lunch everyday? These may seem like small things, but they can go a long way over the course of time. Just do your best to stay financially responsible.
Keep Yourself Motivated
The journey to pay off debt can be a long one and you’ll need to keep yourself motivated throughout the process. If paying off debt starts to feel like a punishment, you may have a harder time seeing it through till the end. So, whenever you hit one of your repayment goals, give yourself a little reward. Maybe it’s something simple like an outing to see a movie, or going out for lunch, but these little treats can help you stay motivated as you continue to pay off debt. No one said it would be easy, but we’re hoping these tips can help you along the way!