Pay Off Debt Quickly: Your Path to Financial Freedom
Too much debt can quickly become overwhelming. Whether you aren’t good at sticking with a budget, you’re overspending and didn’t realize by how much, or you’ve had an unforeseen financial emergency, paying it off is crucial. Though this can seem impossible, especially if you aren’t getting paid more, it is possible to pay off the debt by taking the right steps. Use the following tips to learn how to pay off debt quickly and get your finances back on track.
Establish a Budget
The first thing to do is to establish a budget. Start by determining the amount of money coming in each month and adding up all expenses, including monthly payments on debt. When subtracting expenses from income, the resulting number should be positive. If it’s not, it’s time to think about how to change that number to make it positive. There are a lot of ways to cut expenses and reduce the amount of money spent each month. By doing so, it’s possible to start paying off debt faster and saving money for any emergencies in the future.
Cut out as many unnecessary expenses as possible. Those who eat out a lot may want to start eating at home more frequently. Going out or having food delivered can be very expensive, so cutting this out of the budget can make a huge difference. Spending money on clothes, hobbies, entertainment, and more can also add up quickly as well, so minimize these expenses at least for a little while to get your budget under control. Once the big debts are paid off and you have some money in savings, it will be easier to add in a little bit more spending money into the budget.
Get Rid of Credit Cards
Credit cards often have high-interest rates, so paying them off can make a huge difference. The key, however, is to not go back to using them once they’re paid off. Instead of paying the monthly minimum and then maxing it out again, just stop using credit cards. Either cut them up or place them somewhere they can’t be used. Continue to work on paying them off. If nothing is added to the credit cards during the month, it’s not going to increase the debt further, and it will be easier to pay them all off.
Pay off High-Interest Debts
Interest rates cause a lot of money to be wasted when it could be put somewhere else in the budget. It’s a smart idea to start paying off the high-interest debts while continuing to make payments on your debts with lower interest rates. There are numerous methods that can be used to pay off the high-interest debts as fast as possible, including the following.
- Snowball Method. With the snowball method, continue making minimum payments on all debts. Put any extra money available toward the debt with the lowest balance. Once that is paid off, the money used for that minimum plus all extra money available goes to the next smallest debt. Continue in this fashion until all debts are paid off.
- Avalanche Method. The avalanche method works similar to the snowball method, but the focus is on interest rates, not the amount of debt. Continue making minimum payments on all debts, and any extra money leftover should be put towards the one with the highest interest rate. Once this is paid off, start putting money toward the debt with the next highest interest rate. This ends up saving you money in the long run because the remaining debts have lower interest rates.
- Balance Transfers. With credit cards or other types of debt, it may be possible to lower or eliminate interest through a balance transfer. Opening a new credit card with a 0% interest rate for the first year could provide a way to save money on interest while the balance is being paid off. If the balance isn’t paid off in the year, however, interest will start to accumulate.
- Request a Settlement. It is possible to request a settlement in some cases. If the debt is with a collection agency or otherwise something that can be settled, such as medical debt, this could be a way to pay it off quickly and save money. Request a settlement and see what would need to be paid in full or over monthly payments to settle the debt. Make sure this is paid in full by the deadline to avoid any issues.
The key here is to find a method that works for you and that you can stick with. By finding the right method to use, you’ll be able to pay off the high-interest debts fast, get your finances back under control, and not have as much to worry about with your budget.
Look into Consolidating Debts
With the amount of money wasted paying high-interest rates, it may be worthwhile to look into consolidating the debts. Instead of having interest accumulate on multiple debts each month, with debt consolidation, there is just one monthly payment with one interest rate to worry about. By consolidating the debts, there’s less to worry about each month, and it’s easier to make the payments. Since the interest is lower and is only on one debt instead of multiple, this could also be a good way to save money and reduce expenses while making sure all of the original debts are paid off.
While paying off debts can seem to be an insurmountable challenge, it’s not. It does take work, and it will take some time, but there are many ways to start paying off debt quickly without having to get a second job. Take the time to try out the tips here to find out how quickly you can pay off debt and get your finances back in good shape again. With the right methods, this can be a lot easier to do than you might have thought.
Cary Silverman is a consummate entrepreneur having sold multiple companies during his 20 years of business experience in the financial industry, but for him, it isn’t about the money. His success is rooted in his passion to focus on doing something better today than it was done yesterday. These days, he’s the CEO of Waldo General, Inc. that oversees the operation of King of Kash.