Debt can be an enormous strain on both physical and mental health. But with proper planning, debt can be overcome.
Start by paying down credit card and loan balances. There are various strategies available, including debt snowballing or taking advantage of unexpected financial windfalls to reduce debt more quickly.
1. Create a budget
For effective debt repayment and savings goals like buying a new car or house or going on vacation, creating and adhering to a budget are vitally important.
Starting by categorizing fixed expenses – such as rent or mortgage; utilities; and debt payments – from variable expenses like dining out, clothes shopping and travel expenses. Use past credit card or bank statements to establish how much is spent each month in each category.
Make sure to account for any recurring costs that occur quarterly or annually, such as auto insurance premiums, back-to-school expenses and holiday shopping expenses. Incorporating potential cost creep (where prices start low but gradually increase over time) into your calculations as well as any upcoming celebrations or events you might need to budget for is also recommended.
2. Cut your expenses
Debt can be stressful, particularly when interest rates are high. To overcome it, however, there are various strategies available such as creating a budget, prioritizing debts and taking advantage of any unexpected financial windfalls.
Make saving easier by cutting unnecessary expenses such as magazines, streaming services and memberships that you rarely or never use; additionally set aside some funds for savings and debt payments.
If you own credit cards, consider the “snowball method.” This strategy involves paying off smaller balances first before moving onto larger ones – keeping yourself motivated while clearing away debt more quickly. Also try consolidating debt or refinancing student loans to lower interest rates.
3. Sell your clutter
Debt can be like clutter in that it takes up space and adds unnecessary stress, leaving little savings available in case of emergencies or sudden changes to your financial circumstances.
As part of your financial decluttering plan, selling items that you no longer use or want can help free up space in your wallet. There are plenty of online marketplaces where you can sell unneeded items and generate some extra funds in return.
If your items are still in great condition, local consignment shops offer another great solution for selling them. Here, they typically set their own prices, making this an excellent place for tools, electronics, home decor or clothing items.
4. Get a part-time job
If your current income doesn’t cover all your monthly expenses, you may need to find ways to supplement or increase it – this may involve finding side hustles, taking on additional shifts at work, or asking for raises.
Be careful not to overwork yourself and become exhausted; use any extra income you earn toward meeting financial goals such as paying off debt or saving up for something specific.
Consider other means of cutting expenses, such as low-interest debt consolidation loans or settlement, which can save thousands in interest charges. Register with WalletHub to access our free tools and advice – plus chat with a certified credit counselor for professional tips and support!
5. Start saving
Saving money is key to paying off debt, whether by cutting spending or finding ways to increase earnings – whether that means taking on additional shifts, taking on side hustles or asking for raises as ways to bring in extra funds.
Start by tallying all your monthly expenses and subtracting them from your total income, which will provide an idea of what percentage of your bills you pay every month compared to what percentage is due. With that information in hand, make larger payments on debt – the more payments made above minimum payments the faster it will vanish! Alternatively consider debt consolidation loans which reduce interest rates to expedite this process further.