Many individuals want to quickly get out of debt, but don’t know where to begin. Here are some proven strategies that will get them on their way.
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1. Establish a budget.
As much as it’s difficult, getting out of debt on a tight budget can be even more challenging than when there’s plenty of income coming in. Luckily, there are ways you can overcome debt in this way.
Establishing a budget should be your first step toward financial independence. Start by reviewing your paycheck and calculating how much money comes home each month after taxes; then closely examine your spending habits and where you may be overspending (e.g. coffee purchases or purchasing the newest iPhone).
Once you’ve reduced expenses and revised your budget, the next step should be adding extra income. Consider taking on part-time work or selling unnecessary clutter to increase cash flow – any extra funds earned could go directly toward paying down debt faster.
2. Sell your clutter.
As well as cutting spending, another great way to bring in extra money is selling items you no longer use – such as old televisions, exercise equipment, furniture or clothes sitting unused in your closet.
Sell unwanted items through apps such as Offer up, Facebook Marketplace and Craigslist or local mom groups – remember one person’s trash could be another’s treasure!
Unlearning unnecessary purchases may be hard at first, but once you start earning additional income and paying down debt, you should find it much simpler to say no to future ones. Experiences are far superior to material possessions and often cheaper; seeing Taylor Swift perform live can only become better with debt-free debt payments hanging over your head!
3. Get a part-time job.
Expanding your income is one way to quickly reduce debt. Working more hours at work, asking for a raise, and starting a side hustle are all viable strategies to do just that.
However, these strategies may not always be feasible and when your budget is already stretched thin enough that paying bills becomes challenging, taking on additional work may not be worth the stress involved.
Focus on making small adjustments in your spending habits instead, such as making more meals at home and cutting back on nights out and happy hour visits. Also try paying cash so you can actually feel it leaving your hand and feel its value more deeply – it might take getting used to, but this will teach you the true worth of each dollar while keeping credit card balances under control.
4. Make minimum payments on all of your debts.
If you own credit cards or loans, take an inventory of all their balances. Doing this is an important step toward knowing exactly how much debt there is to repay and creating a budget to combat it effectively.
Diving out of debt requires time, dedication and persistence. Cutting expenses, increasing income and prioritizing debt payments will all take work – as will creating an emergency fund and starting a savings account – but once completed it could open the doors to wealth-building possibilities.
Many people turn to the “debt snowball” method for debt repayment, in which smaller bills are tackled first, with any excess funds going toward paying off more expensive ones as the debt snowball rolls along. Others may prefer “debt avalanche”, in which minimum payments are made on all debts with any extra payments funneled toward paying down the higher interest rate debts first.
5. Start an emergency fund.
Unlocking debt can be challenging, yet millions have managed to do it successfully. Successfully managing it involves altering spending habits, budgeting expenses, prioritizing debts and saving for emergencies – if you need assistance in this regard check out Financial Peace University (FPU).
Make an initial deposit into your debt payoff fund from any extra money received, such as tax refunds, bonuses or raises. Next, look for ways to save money – like purchasing less expensive cars when car shopping or downgrading cell phone plans; or try skipping dinner out every week and/or giving tithing money directly to church. These efforts can add up quickly! And once you have an emergency fund set aside you may no longer need credit cards that charge higher interest rates!