How to pay off debt? If you have debt and wondering how in the world you will be able to pay it off, you have come to the right place.
Companies, people, and nations are going bankrupt every day because of debt. Debt can mess up your life and put you in a hole that you will never walk out of.
Whether you are suffering from credit card debt, mortgage, car loans, etc; you will never take a break until it is fully paid off.
The main question is: How will you pay off your debt?
To pay off your debt, you will need strategies and the discipline to follow those strategies.
In this article, we are going to give you tips you can use to pay off your debt.
Tip 1: Minimize your expenses
The first step to paying off your debt is reducing your expenses. You are not paying off your debt because the money is being spent on something else. You can reduce your expenses by eliminating some of your purchases or by shopping at cheaper stores for things you need.
For example, instead of shopping at Target, you can shop at the Dollar Tree. This way you will get what you need at a fraction of the cost. You can also stop buying clothes every day or buying packaged products such as water, food, products, etc.
Buy generic brands instead of brand-name products and medications. Brand name medications are expensive and do not have extra healing powers. The only thing different about them is their names.
Tip 2: Pay off your expenses from the most expensive to the least expensive
When paying off your debt, consider paying off the most expensive first. For example, a $20,000 credit card debt with a 20% Annual Percentage Rate (APR) will be more expensive for you than a $2,000 car loan.
I am not telling you to stop paying for your car loan. What I am saying is that you can make your minimum payment on your car loan and allocate more money toward your credit card debt, in this case.
The reason, you need to pay off the credit card debt first is the APR that is compounded. Compounding interest increases your debt exponentially until you can no longer be able to pay it off. That is why you need to pay off this debt and similar ones as soon as possible.
Once you are no longer paying interest charges on any of your debts, you can then start paying debts that will cost you more money in the long run.
For example, there is an interest rate you pay every month on your mortgage. If you bought a house for $150,000, you will end up paying close to $300,000 at the end of the lifetime of your mortgage. The only way you can minimize the cost of your house is to pay off your mortgage as soon as possible.
That is instead of paying off the house in 30 years, you can pay it off in 15 years by doubling your monthly payments.
You can do this by getting another job or a side hustle.
In the end, you would have saved money equal to a 15 years interest or more.
Tip 3: Monitor your credit card spending
Credit cards can save or ruin your life. The best way to use your credit cards is to use less than 30% of your total credit limit and pay off all your balance during the grace period. That is you must pay off all your balances before their due dates.
This process will help you build your credit and at the same time increase your credit score.
Related article 1: How to avoid interest on a credit card?
Related Article 2: Credit Report Overview
Related article 3: 6 factors that can hurt or improve your credit score
Tip 4: Create a budget
It is always important to create a budget. Your budget will help you understand what your income and expenses are.
In other words, you can see where you are wasting money, spot the most expensive debt, and locate where you can reduce expenses.
You can learn how to create an easy-to-use budget from the following related article.
Related article: How to save money? Step by step
Tip 5: Pay as much as you can
Another important tip is to pay as much as you can. If you own a credit card, for example, you know that there is a minimum amount you need to pay every month.
There is no way you will get your debt paid off if you only pay the minimum payment. You must pay as much as you can. Reducing your debt in a very short time minimizes the interest you pay on it (depending on the structure of the debt).
The more money you pay on your debt, the faster you can reach your financial independence.
Please, use the following article to learn how you can pay off your credit card debt.
Related article: 10 strategies I used to pay off my credit card debt
Tip 6: Live within your means
You can not pay off your debt if you do not live within your means. You must avoid buying things you do need and spend less on what you need.
According to AARP, 55% of Americans spend money that is equal to or more than they make. This is sad news for millions of people out there. If you are one of them, I want to ask you the following question.
How will you pay off your debt, if you are spending more than you make?
Spending more than you make implies that you are getting into more debt.
Tip 7: Get a second Job
Is your debt to much that your income cannot pay it off fast enough? You can always get a second job to help you pay it off.
If your schedule does not allow you to have a second full-time job, get a part-time job. There is away from a room for a part-time job. This is because some jobs can allow you to pick hours that will work for you.
To get the most out of a part-time job, focus on jobs that offer a higher hourly rate. This way you will work fewer hours and make more money.
If you can’t find a job that pays a higher hourly rate, take what you can find. a $7.25/hour is better than nothing.
Tip 8: Downsize your belonging to create another income
Did you know that you can create a second income? You can do it by selling things you don’t need. If you have hundreds of pairs of shoes and a ton of clothes, consider downsizing. It will not make sense to have that much stuff while your bank is knocking on your door. The money you collect from these sales can be used to pay some of your debts.
The truth is you haven’t worn some of those clothes in many years. Why would you keep them if you don’t wear them?
Tip 9: Do not save money in your account while there is debt to be paid off
It is important to save money. Matter of fact, saving money should be one of your daily practices.
However, if you have debt, you must find a way to pay it off before you start packing money into a savings account or Certificate of Deposit account.
NOTE: You should have an emergency fund. Besides this emergency fund, you should put all your resources toward paying off your debt.
Related article: How to save money?
Tip 10: Use your vacation for a side hustle instead of flying some where
Some of you may not want to hear this. Instead of spending your entire month on a beach in Hawaii, you can use this time to make extra money that will help you pay off your debt.
Why should you focus on the debt that is suffocating you instead of vacation? This is what will happen if you go somewhere for a vacation.
- You will spend thousands on your flight
- The hotel will charge you enormous sum
- Restaurants will get their shares
- You will spend money on t-shirts for memory, etc.
There is nothing wrong with all that. However, the money you will spend on that vacation will be in thousands.
If you use this money toward your debt, you will be ahead of your payments. On top of that, you could work somewhere to increase your salary for that month. That is you are still getting paid at your regular job, the second job is paying you, and your debt is going down.
I think this would be a great idea.
Tip 11: Consider the balance transfer route
A balance transfer is the process of transferring a balance or debt from one account to another. For example, if you have a credit card debt with a high APR, you can transfer that balance to another credit card with 0%APR.
This trick can help you pay off your debt faster with no interest on it.
