Digging yourself out of debt can be a difficult task, and people across the nation fall into its clutch every day due to a variety of reasons. Maybe you struggle with sticking to a budget, or possibly an unforeseen emergency forced you to spend way more than planned. Whatever the cause, debt can cause a huge amount of stress and panic, but paying it off can be a much easier task when you follow these tips.
Establish a Strict Budget
While working through debt issues, it’s of utmost importance to establish a budget and stick to it. There are many apps and tools you can utilize to keep your budget in check while you’re working off debt. Examine your monthly income and expenses, search out places you can make cuts, and plan the ways you can save money for the foreseeable future.
Stop Using Your Credit Card
This can be scary for those of us who use our cards for everything, but getting rid of temptation to accumulate more debt is key. Ignore the cash back or rewards you may get for credit card use. Digging yourself deeper into debt isn’t worth the couple hundred air miles you’ll receive. Take cash or a debit card when you go shopping to avoid hiking up debt and increasing the likelihood of paying interest rates.
The Snowball vs. Avalanche Debate
You’ve likely heard these terms in debt strategy before, but what do they actually mean?
Snowball Method: The main strategy behind the Snowball plan recommends a person pays off accounts with the lowest balance first. This is a psychologically helpful tactic that gives instant results and may work better for those who are more emotionally haunted by their debt. To use this method, list current accounts in order of cost, going smallest to largest. Set aside the necessary funds to cover each account’s minimum payment, and use whatever you have left over to cover the remaining portion of your smallest account. As each one gets paid off, use your surplus money to tackle the next smallest debt. With this technique, you’ll be have less debt accounts to worry about.
Avalanche Method: In contrast, the Avalanche method recommends paying off and getting rid of accounts with the highest interest rates first. The snowball method effectively ignores interest rates, so it may be more productive for your specific issues to tackle the accounts that are quickly tacking on more money each month. To utilize this method, order your debts from largest to smallest interest rate. Set aside the necessary money to handle each minimum monthly payment, and put your extra funds toward the account that’s accruing the highest level of interest. This method can save you more money in the long run, and is often more efficient.
Both have their positives, and sometimes a mix of the two can be just the ticket for solving your debt problems. Think about your debt needs and determine which will work best for your situation.
Pay More Than The Minimum
To see a bigger dent in your debt, it may be necessary to put more money toward your monthly payment than the minimum. Banks and creditors capitalize on the time it takes to get their money back from you, so don’t play into this lucrative game. Minimum payments merely prolong the payoff process.
Halt Luxury Purchases
This may seem like a no-brainer, but many people struggle with this concept. Yes, that trip to Hawaii may be the vacation you’ve always dreamed of, but debt waits for no one. Don’t add to what you already owe by spending money on things you truly don’t need.
Garage Sale Tactic
If strapped for cash, look around for resources you can sell that you won’t miss. The quick cash can be used in lieu of credit cards for the time being, or can be put toward paying off different accounts. OfferUp is an easy way to sell your items to those in your community.
Hire A Professional to Deal With Debt
Don’t wait when you owe money to the IRS. If you are in hot water with debt, it might be in your best interest to hire a professional that can help you resolve taxes and determine debts owed. This easy bit of outsourcing can save you a lot of money and stress, plus help you avoid any legal issues.
Getting yourself out of debt can be a scary and stressful process, but you’re not alone. Plenty of companies offer software that can help you tackle your debt issues. Try these tactics in your everyday life and look into hiring professional help to ensure you pay off your accounts in the quickest and most efficient way possible.