Debt can be an overwhelming obstacle for some people to pay off. Compounding from month to month, increasing debt can be hefty financial burden with serious consequences for your future.
Fortunately, there are steps you can take to conquer debt. All it takes it dedication, determination, and the willingness to change your financial lifestyle to better yourself. Ultimately, it takes time and a clear strategy if you want to overcome your debt and take considerable strides to a healthy financial future.
But not everyone has the time to do that. If you need to pay off your debts immediately, read on for the essential tips.
The Debt Snowball
Coined by financial expert Dave Ramsey, the debt snowball method is strategy focused on psychology instead of math. Think of it this way: you have debts from multiple sources all for varying amounts. Where do you even start?
You might thank approaching the debt with the highest monthly interest rate is the optimal solution. For some people, this strategy might work. However, it may also be the slowest way to paying off your debts while your smaller balances only continue to increase.
The Debt Snowball method flips this ideology. Instead, you pay the smallest balance first and work up from there. This way, you quickly score some psychological ‘wins’ by watching your debts disappear. Plus, those small payments add up quickly into savings—which can then be shifted toward paying your larger balances.
Stop Using Cards. Now.
Typically, credit cards are the number one cause of debt in Americans today. We use a credit card for everything, from groceries to concert tickets to cars. Most of us have more than one card!
If you’re suffering from debt, perhaps the easiest way to stop accruing any more is to stop using credit cards cold turkey. The more you swipe, the more your balance climbs. Create a budget or financial plan that uses more cash in your day to day expenses.
Earn More Money
This might seem like a no brainer. If you start making more money, of course you can use that to pay off your debts!
It’s not as simple as just asking for a raise, though. You might need to get a part-time job, a side hustle, get creative with Etsy or start selling old or unused things over eBay.
Sometimes, just cutting your spending isn’t enough for people. There’s why you need to work harder and work smarter to combat debt.
Credit Counseling & Debt Management
Credit counseling and debt management may be the last resort for people struggling with debt and seemingly no clear strategy to eliminating it soon. These organizations negotiate with your debtors to take on your debts for you, consolidate it into a single larger payment, and work with you to set up a monthly payment plan.
There are two immediate advantages. First, you don’t have to spread your payments over multiple sources and deal with multiple varying interest rates. Second, under a single payment, you can secure a significantly lower monthly interest rate that may be easier to handle.
However, take caution with this route, as there are several scams out there that can exploit people in need. Avoid any service that promises to reduce the total amount you owe or charges big upfront fees.