Financial advice abounds on how to quickly eliminate debt, yet often this doesn’t work out for those trying to escape its clutches.
Rethinking your approach to money and debt is the single greatest change you can make. Begin by setting a budget and cutting back on non-essential line items.
Prioritize debts according to interest rate; this strategy could save more money in the long run.
1. Start With a Budget
Budgeting is the first step toward debt elimination, enabling you to track spending and identify savings opportunities like comparing car insurance quotes or purchasing bulk.
Subtract spending money from earnings, and use that figure as your “debt money.” Prioritize and repay any existing debts with it.
2. Make Minimum Payments on All of Your Debts
Debt consolidation requires taking several steps. Track your spending and learn to budget; cut up credit cards; switch over to cash payments instead; minimize unnecessary expenses and prioritize debt payments.
Pay off small balances first to gain momentum and reduce debt more rapidly. By doing this, it will become much simpler and faster to overcome your obligations.
3. Make Extra Payments on Your Highest-Interest Debt
Reducing debt requires dedication and hard work. Begin by organizing all your debts according to interest rate and paying the minimum amounts owed on each one.
After paying off all your debts, add any extra money you have each month towards paying off those with the highest-interest rates – this will save a substantial sum in interest costs over time.
4. Take the Debt Avalanche Method
Both the debt avalanche method and debt snowball method offer ways for people to reduce debt more rapidly than simply making minimum payments alone. They focus on higher-interest loans to save on interest costs.
Create a list of all of your debts and note their interest rates and minimum monthly payment amounts. Prioritize using most of your budget toward paying down the highest-interest debt first.
5. Start With the Debt Snowball Method
The debt snowball method may not be an exclusive method for paying off credit card balances, but it does give a sense of momentum that can keep you going in your efforts to reduce debt. With this strategy, debt accounts by size are prioritized for repayment with their minimum payments being transferred into each new debt account until all are cleared off and minimum payments rolled over into new ones as you clear them away.
Staying on track with your goals and reducing interest charges over time are both key components to being financially successful.
6. Get Financial Peace University
Financial Peace University is a nine-lesson class that teaches common-sense biblical money principles to over 5.5 million students worldwide. Join a class or watch online to discover Dave Ramsey’s step-by-step plan to pay off debt quickly and build savings for the future.
One effective way to stay motivated when trying to achieve debt freedom is by creating a Debt Freedom Jar. This visual reminder lets you measure progress while celebrating victories along the way.
7. Use Coupons
Utilizing coupons is an easy and affordable way to reduce monthly expenses and speed up debt repayment. They’re widely available online, in newspapers and even local grocery stores – giving you more money in your budget for debt payments and saving!
An effective way to save money is reducing expenses through cutting unnecessary spending and negotiating with creditors, which will enable you to make extra payments each month on any outstanding debts.
8. Go for a Run
As part of your attempt to escape debt, making sacrifices may be necessary. Perhaps this means giving up eating out altogether, purchasing used tires instead of new ones or forgoing attending Taylor Swift concerts – however it will all pay off in the end!
Try freezing entertainment costs until you’re debt-free; though initially it might seem difficult, eventually you will see results.
9. Put a Spending Freeze on Entertainment Costs
Reduce debt by cutting unnecessary expenses such as dining out or purchasing the latest electronics or leather boots.
Try setting aside one day or one month in which you spend only on essentials to save money that can go toward paying down debt faster.
Belt tightening can help speed your journey out of debt faster – just ask the people featured in NerdWallet’s How I Ditched Debt series.
10. Say No
Pay with cash instead of using credit cards to reduce impulse buys and save a considerable sum of money.
Debt relief may seem difficult, but it can be accomplished. Millions have managed to climb out from under debt using simple strategies like budgeting, making extra payments, and learning when to say no – take their example!