11 Essential Tips For Paying Off Debt
Topic - Savings Tools
Published by| 06-10-2022
Having a mountain of debt can feel like an impossible burden. However, with the proper strategy, it can often be overcome. Follow these simple tips to help give yourself the best chance of paying off your debts.
Don't give in to denial
Sometimes it can feel like an impossible task, and you might even be afraid to examine all your debts because they can feel overwhelming. This can sometimes lead to ignoring debts or being in denial about how much you really owe. This will hurt you in the long run because interest will keep adding up. Take an honest and comprehensive look at all your debts, even the smallest ones or the ones that you might think are incorrect. Having an accurate picture of what you are up against is the best way to overcome it.
Always create a plan
The best way to get started is to take stock of your situation and create a sensible plan to move forward. Begin by assessing each of your debts and understanding exactly how much you owe and to whom. Then evaluate your income and expenses and calculate how much you can put towards paying off your debts.
Prioritize your debts
Prioritize which debts you want to pay off first. While it might be tempting to pay off the smallest debt first, it makes more financial sense to choose the debt that is costing you the most in interest or will have severe penalties.
Focus your payments
Rather than just trying to pay more on all of your debts each month, select the highest-priority debt and pay as much as you can manage towards that debt, and just the minimum on all other debts. When that debt is cleared, then prioritize the next most important debt, and so on.
Specify extra payments towards principal
It's not always possible, but with some types of loans or debts, you can specify that your extra payment (anything above the minimum required payment) can go towards the principal rather than the interest. This will help you pay off your debt faster in the long run.
Automate your payments
Forgetting to make a payment can be very detrimental, so whenever it is possible, you should try to automate your payments. Whether it be an automatic deduction from the lender themselves or scheduling automated payments via your bank's online app, there are numerous ways to make sure you do not miss any payments.
Consider debt reduction methods
Make sure to evaluate any opportunities you have to reduce your debt, whether it be refinancing at a lower rate, consolidating at a lower rate, or even just balance transfers on cards to a better rate. Not all methods will work for everyone, but it is worth it to take a look at what options might work for your situation.
Try to add additional income
Whether it be getting a raise at your current job, adding a side part-time job, starting a work-from-home side hustle, or even just selling off unused items around the house, anything you can do to increase your income will help pay off your debts faster.
It's definitely not fun to make sacrifices, but it's necessary to work towards your goal of being debt-free. Eliminate all unnecessary spending, minimize social outings, be thriftier about purchases, and always shop for the best deals. It doesn't mean you have to eat only ramen noodles every night, but trimming every little bit of expense helps, and remember that the sacrifices are temporary while you strive to reach your goal.
Remember why you're fighting
It can feel tough at times, but always remember the reason you're putting in the effort to pay off your debts, and how great it will feel once it's finished. Less stress, more financial freedom, better quality of life – always remember your goal.
Set goals and track your progress
One of the best ways to fight off the stress of debt is to keep track of your positive progress. Set milestones that you want to reach, such as paying off a specific debt. It can even be helpful to print off a chart and post it on the fridge so you can remind yourself every day that you're making progress towards being debt-free. Celebrate your milestones and stay motivated!