It’s easy to feel frustrated when you’re dealing with debt, but there is hope! Here are 8 tips for paying off debt fast and staying positive while you do it.
That’s a word that strikes fear into many a brave heart. The average American household carries $16,883 in credit card debt alone. That’s not even factoring in car loans, bank loans, or mortgages.
To say that many people are drowning in debt is an understatement.
You’d probably rather not be one of those people. To get out from under your burden of debt, check out these great tips for paying off debt.
- Confront Your Debt
Debt is all too often like the elephant in the room. You know it’s there, but you don’t want to think about it. You’re not even really sure how much you owe, you can’t ever bring yourself to sit down and look at all your debts in one place.
Humans inherently fear the unknown. As long as you don’t know how much debt you have you’ll fear finding out. You might think that it’s scarier knowing how high that number is so, like the proverbial ostrich, you stick your head in the sand and ignore.
But the truth is, you can’t do anything about your debt until you confront it. The number might shock you a bit at first. But now you have something to work with. For most people, that brings a sense of purpose and hope. It might take a while, but you can do it.
You may also want to seek help from a debt relief company. Just be sure to vet the company first by reading reviews like this Freedom Debt Relief review. Some companies are more interested in getting your money and will only sink you further into debt.
- Write a Budget (And Stick to It!)
But how do you do it? Start by writing a budget. If you already have one, excellent. It’s time to revise it. Chances are that you don’t have one though and it’s time to set one up.
If you pay primarily with plastic, free tools like Mint.com are great for setting up your budget. Enter in all your accounts and it will automatically track your spending.
What you find about where your money’s going may be surprising (and a little scary!) But, remember, you’re confronting things right now. That includes the cold hard truth about your spending habits.
Now, determine where your money should be going. Work out a realistic budget that you can stick to, and be sure to stick to it.
- Change Your Habits
Once you’ve set your targets for each spending category, you’ve got to make it happen. That probably means that you’ll have to change some habits. In fact, if you don’t have to change anything, you probably didn’t make your budget strict enough.
For example, how much do you spend eating out? Maybe it’s time to organize yourself and make more meals at home. You get bonus points for taking a sack lunch to work instead of buying lunch every day.
What about coffee? If you buy just one cup of coffee on your way to work, that’s about $150 a month. If you’re married and your spouse is doing the same thing, you could save $300 a month just by cutting out a trip to the coffee shop! If you can’t live without your coffee, simply brew some at home and take it with you.
There is an infinite number of ways that you can cut spending. But you have to be disciplined about what are really necessities.
- Stop Using Your Credit Cards
Paying off your credit cards will be far more difficult if you’re still using them and racking up more debt. Delete your card information from online stores so it won’t be as easy to buy. It will be less of a temptation that way.
Switch to your debit card instead. That way, it will still be easy to keep track of your spending electronically but you won’t be adding to your credit card. Plus, you can use debit cards for most recurring payments that require credit cards.
However, if that isn’t enough, switch to cash. If you can only spend what you have in your pocket, it will be impossible to overspend.
- Rank Your Debt According to Interest Rate
Now it’s time to tackle that debt. Rank all your debts in order from highest interest rate to lowest. The highest one will be your priority.
Make at least your minimum payment to all the other debts. But concentrate your extra efforts on that most expensive one. Work your way down the list until you’ve paid off each one.
- Allocate Any Extra Money to Your Debt
Any extra money should go straight to your debt. Did you get a big fat tax refund this year? Slap it on that debt. Christmas bonus? Same thing.
It can be hard not to use that extra money for something fun. But remember, once you’ve paid off your debt, you’ll have extra money from all the interest you’re not paying. Then you can take that fun vacation or buy yourself something nice.
Do you look around and realize that you have a lot of stuff that you don’t need? Think about downsizing? Have a garage sale or sell items online and put the money you make towards paying off your debt.
You might even be able to return a few impulse buys that you haven’t worn or used yet.
- Keep Your Eye on the Prize (And Enjoy Life in the Meantime!)
So how do you stay positive through this whole process? Keep your eye on the prize. Think about how excited you’ll be when you can finally say that you’re debt-free!
Cut back on unnecessary expenses but allow yourself a reward every once in a while to keep up your motivation. Remember that rewards don’t have to be expensive. It could be something simple you enjoy doing with your family.
You Can Do It! Follow These Tips for Paying off Debt
Paying off your debt can seem like an insurmountable task. But you can do it! Follow this tips for paying off debt and figure out how long it will take. Then you can plan for that glorious day when you pay off that final credit card.
For more great tips about finances, be sure to check out the finance section of the blog!