Don’t let debt hold you back from living the life you want. While it will take some extra work to pay back everything that you owe, it will be well worth it in the long run. It’s time to tackle the issues you’ve been putting off and free yourself from financial burdens.
Lower Your Rates
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Does it feel like you’re barely making a dent in your debt each month? That could be due to high interest rates on your loans. When the rates on your debt are too high, most of your monthly payments will end up going toward the accumulated interest rather than the principle. To really cut back on your debt, you’ll want to try to lower your interest rates to a more reasonable level. Here are a few options you can try:
- Open a credit card with low interest rates or a temporary no-interest period and transfer your balance to the new card.
- Consider having multiple loans consolidated into one with a lower overall rate.
- Call the card issuer and request a lower rate.
- Consider refinancing a high-rate auto loan.
Decide on a Plan of Attack
List all of your debts, including the balance and the interest rates. Once you have all this information it’s time to decide how you’ll approach your debt payoff. There are two common strategies suggested for debt repayment:
- Snowball method: Pay the minimum on all debts except the one with the lowest balance. Funnel all extra money to this loan until it’s paid off, then direct that money to the loan with the next smallest balance, and so on.
- Avalanche method: Pay the minimum on all debts except the one with the highest interest rate. Funnel all extra money to this loan until it’s paid off, then direct that money to the loan with the next highest interest rate, and so on.
While the snowball strategy generally usually makes it easier to see your progress in getting out of debt, it may take longer to pay off all your loans. While it may be more difficult to stay motivated with the avalanche method, it’s the fastest way to pay off your loans.
Create a Budget
Making a detailed budget is one of the best ways to reduce your debt. Be extremely thorough when listing your monthly and annual expenses. It’s easy to forget about things like pet food, car maintenance, and haircuts, but these things can add up just as easily as utilities, groceries, and housing costs.
Once you’ve made your budget, look for areas where you can cut back. Perhaps you can cancel a subscription or start making coffee at home instead of picking up one at a nearby coffee shop. Set strict limits on how much you can spend on essentials. Focus on maximizing the money that’s left over at the end of each month so you can contribute that amount toward paying off your debt.
Take on a Side Job
What if you don’t have a lot of money left over after paying for necessities? In that case, it’s time to find a new source of income. Fortunately, it’s easier than ever to find a side job thanks to the current gig economy. By providing a service for someone else, you can earn extra money in your spare time. Popular options include driving for a ridesharing service, listing a spare room on Airbnb, working for an on-demand delivery service, pet sitting, and freelance writing.
You can also consider starting your own business with a company like Amway. You might be wondering “Is Amway a pyramid scheme?,” so you’ll be pleased to learn that it’s actually a completely legitimate multi-level marketing program. Direct sales drive your business (not recruiting), which ensures that you earn real profits along the way. And just like other side gigs, you can do your direct sales work in your spare time while still maintaining a full-time job.
Paying off your loans and credit card balance can be a challenge, but you’ll love the sense of freedom that comes from getting out of debt. Use these tips to better your financial future.