It is common to hear people say that they would like to pay off their debts, but they aren’t sure about what steps to take or where they should get started. There are several ways for how to get out of debt and each may suit different people in different situations.
How to Pay Off Debt:
Here are a few great ways to payoff debt quickly and get yourself back on track:
1) Pay More than the Minimum Amount
Each month, try to pay more than the minimum payments you owe. If you are only making the minimum payments on your debt each month, then it can take much longer to pay off the principal balance. Try to make extra payments whenever you can afford it. Paying an additional amount as small as $20 per month can make a difference over time.
2) Spend Less than What You Normally Spend
Most of us have a wish list that is bigger than our incomes. Many people are still in debt because they tend to get the things that they want when they want them. Make an effort to only buy things that are needed and necessary. Plan out big purchases and try not to spend money on less important items.
3) Pay Off the Most Expensive Debt First
One of the best strategies to get out of debt is to pay the minimum amount on all debts, except the debt with the highest interest rate. Concentrate on that one debt that has the highest interest rate and focus on making extra payments each month. Once you pay off the highest interest rate debt, you can take all the money that you were using to pay off that debt and apply it to paying off the next highest interest rate debt. Continue this method until you have paid off your last debt. This strategy will help you get out of debt quicker.
4) Consider Being a One-Car Household
If you have two cars, then you should consider getting rid of one and look into other methods of transportation like walking to work, taking public transit, or carpooling. You can save yourself thousands of dollars every year by using just one car. This way you can save the extra money and use it for paying off your debts.
5) Save on Groceries
To save extra dollars, try stocking up on groceries when they are on sale. By stocking up on your groceries when they are on sale, and then skipping a month of grocery shopping, you can easily save up to 25% on your annual grocery bill. The key aspect of this strategy is to keep your eyes peeled for sales. Even if you cannot skip shopping every month, you can try doing it once every other month. You can save a great amount of money by doing so.
6) Get a Second Job and Pay Down Your Debt
Getting a second job or a part-time job is a common way people pay off their debts. This strategy doesn’t work for everyone, but if you can make it work, then you can rid yourself of debt in fewer years. Once your debts are paid off, you can go back to working a single job.
Check out this video for more tips to pay off your debt featuring our COO Mark on KIMT.
7) Spend Wisely
For some people, carefully tracking spending can save just as much money as working a second job. For this strategy to work effectively you need to eliminate items you buy that are not necessary. Once you have disciplined spending habits, you can use the savings in your monthly budget to pay down your debt.
8) Consolidation Loans
Check in with your financial institution to see if they can consolidate all of your loans into one loan with only one payment and with a lower interest rate. This can be a helpful step in getting rid of your debts. However, this strategy of consolidation loans can only work if your budget does the following two things:
- Keeps you from building up a new debt while you pay off the consolidation debt
- Helps you in saving money every month