Once the high of shopping and spending has subsided, the resulting debt can feel like a dark, depressing cloud looming over your head. It can hard to see the light at the end of that tunnel, but it isn’t impossible.
To make sure that you get out of debt, you have to make some substantial changes to your life. You went into debt spending more money than you make, using credit cards and loans to buy goods you can’t afford, and being very careless about your finances. You’ve gotten used to this lifestyle, and it’s going to be difficult to break the habit. So, for starters, if you are accustomed to eating out several times a month, it’s time to stop. Painful as they may be, these changes are necessary for getting out of debt.
Know the ‘why.’ Why do you want to be financially free? Why do you want to pay off debt? Why do you want to be in control of your money and your spending? Once you have the answer, keep it at the top of your mind as you pay off your debt. Print a debt tracker, pin it to the fridge and keep track of your payments.
If you are ready to start saving and fight off debt like a champion, here are four smart ways to do just that pay it all off quickly:
1. Stop using your cards
If you are complaining about your debt burden and desperately seeking a way out, only to go out and get this month’s groceries on the credit card, you are messing up big time. This is a huge problem because by using credit cards you are just digging yourself a bigger hole. Swiping them will add to your debt balance, majorly.
If you are having a hard time letting go of your credit cards, get rid of them. If you do not have the discipline to leave the card alone in your wallet, leave them at home or cut them up and throw them away. Freeze them up in a block of ice and leave them in the freezer until you have paid off every last penny.
Also, set up a spending plan that will help keep you from falling on to the credit card as a last resort. And finally, all financially responsible people have an emergency fund equivalent to three salaries to get them through tough situations without resorting to debt, so work on that. All credit card debt is bad debt, treat it as such, and you will find the strength to beat it.
2. Pay as much as you can afford regularly
Once you have saved enough of an emergency fund, don’t start spending that money. Instead, you are now supposed to put that income towards debt as well. The more you pay, the faster you’ll be out of it. Stack up to those sales coupons, and if you save a few dollars put them towards debt as well. If you find a small inheritance or spare change, that goes into your debt payments too.
Put all extra cash towards paying off your debt. This also includes the bonus at work, and any tax refunds you may have received. Now, this takes discipline. If you want to get out of debt and pursue your financial goals, it’s time to build momentum with payments until you succeed.
1. Make cuts to your spending AND Earn more
Take an in-depth look at where your money is going. Next, separate the necessities from the wants. You can go without the morning trip to Starbucks every day, and you sure can skip lunch in your favorite spot and pack something from home instead. Trade in your car for a less expensive one. You can get a car valuation that let’s you know the exact value of your car and how much it will sell for, so you can sell it to pay towards debt as well. There are plenty of websites that enticingly offer we buy any car today, you can check out their services for a quick sale as well.
If you want to overcome debt, you will need to earn more, i.e., just about enough to survive and pay down the debt as well. So, think of ways to increase your income as well. Once you have created circumstances where you are earning more and spending less, you’ll get debt-free faster because you will contribute more towards your debt without compromising on your needs.
2. Pay off the debts with the highest interest rates first
If you have a high-interest credit card stacked high with debt, paying it off will be very difficult. This is because the monthly finance charges will eat up the minimum payments while the balance remains virtually untouched. Paying off a higher interest rate credit card debt will be the best possible way to save money on debt payments.
Do you know about the snowball method? Well, this is where you pay the highest interest, lowest balance debts first to build momentum. It makes excellent financial sense to get the higher interest rates out of your debt portfolio first. Of course, the ultimate goal here is to pay off the debt.
The Last Word: Commit to Your Financial Freedom
Becoming debt-free is a matter of living life, or barely scraping by under threat of bank ownership. So, it’s time to give it all you’ve got. Once you have committed to becoming debt-free, stick to it unashamedly, unabashedly until you achieve your goal. You can’t ‘buy that new t-shirt just this once’ or ‘go to Starbucks because it’s just coffee.’ It’s all your money which you are willingly giving away while you already owe the bank, so it’s not the most responsible thing to do.
Pay heed to the four tips shared above and understand that focus is of utmost importance. And soon you will be completely debt-free. Remember that you want a better life for your self and your family. You should be able to put your kids through college, and financial strength is the only way of doing it right. Follow these guidelines to become a financial force to be reckoned with. Good luck and Godspeed!