Are you heavy in debt and need to get out from under the burden? Is debt limiting your options in life and you need a way out? Debt has a way of creeping up on all of us, especially when we least expect it. If this has happened to you, and you know it’s time to make a change, these are some simple strategies that can help you make big dents in your debt. With a little time, a good plan, and a fair amount of discipline, you can pay down your debt and enjoy more financial freedom.
5 Simple Effective Strategies for Paying Down Your Debt
- Use the snowball method
One of the easiest and most-effective ways to pay down debt is something called the snowball method. This method involves making a list of all of your debts and then paying them off, working upward from the smallest to the greatest. In other words, throw all the money you can on to your smallest debt while making minimum payments on the larger ones. As soon as that debt is paid off, roll all of that money into the next largest one until it too is paid off. Repeat this process over and over, moving up the list from smallest to largest, snowballing your payments until every debt has been paid.
- Pay more than the minimum
If you are playing the “minimum payment game” (just making minimum payments on all of your credit cards), chances are you aren’t making much progress on paying them off. In fact, minimum payments are a debt hamster wheel. They are set by the credit card companies to benefit them, not you. By paying 10%, 20%, 25%, or any dollar amount over the minimum that you can afford, you will start to see your balances drop faster.
- Refinance big debt to a lower interest rate
Interest rates fluctuate – they move up and down, depending on the state of the economy. If you are paying a high interest on any big debts (mortgage, high-balance credit cards, personal loans, etc.), you should ask your lender about a lower interest rate. You can call your credit card companies directly. If the card is in good standing, and you’ve been a customer for any length of time, they will sometimes grant your request for a lower rate. For mortgages and personal loans, securing a lower interest rate will involve refinancing the note, but might be worth it if rates have dropped since you took out the loan.
- Increase your income
Sometimes the answers are in plain sight. One of the best strategies for paying down debt is to increase your income and apply the excess money toward your debt.
- Salary increase. If you haven’t had a salary increase in a couple of years, it might be time to ask for that raise.
- Get a second job (temporarily) until the debt is paid down. Having a second job isn’t an ideal work/life balance scenario long-term. It is admittedly an aggressive strategy, but if you are really serious about paying down your debt, it can be extremely effective.
- Find less obvious ways to earn extra income. Garage sales. Yard work. Babysitting. Dog walking. Look around, and get creative. You might be surprised how much extra cash you can bring in.
- Reduce your spending
Reducing spending will increase your cash flow, and you can use all of the savings to pay toward debt. Individually, these savings may be small, but together they can really add up.
- Cut costs on groceries by shopping the sales ads.
- Save money by cooking meals at home rather than dining out.
- Eliminate luxury extras like high cost cable services, daily lattes, nail services, expensive gym memberships, etc.
- Make a haircut last longer by extending the time between cuts by fifty percent. If you usually get a cut every two months, extend it to three. (If you’re really DIY, cut your own hair, or ask a family member to give you a trim – for free!)
At DebtGuru.com, our business is helping people manage their debt and gain financial freedom. If you still have questions about debt repayment or would like to talk to one of our friendly team members about your specific needs, please give us a call.