Debt is a tricky topic. It can be a weight on your shoulders and a crutch to help you get through tough times. For many people, debt is necessary to finance big purchases or cover unexpected expenses. But whether you’re dealing with credit card debt, student loans, or a mortgage, finding good debt solutions is key to getting your finances back on track. In this article, we’ll discuss some of the best ways to get rid of debt.
1. Pay More Than the Minimum
All debts have a level of minimum payments that must be made each month. But if you’re only paying the minimum, your debt will take much longer to pay off. In fact, minimum payments are often just enough to cover the interest on a debt, which means you’ll be in debt for years to come. So, whenever possible, try to pay more than the minimum. Even an extra $50 or $100 per month can make a big difference in the long run.
2. Spend Less Than You Plan to Spend
There is an old saying that goes, “You can have almost anything you want; you just can’t afford everything you want.” This is especially true when it comes to debt. In order to get rid of debt, you need to live below your means and make spending cuts where necessary. You can then channel that extra money towards paying down your debt.
Additionally, you might want to start paying everything in cash. Studies have shown that people spend less when they use cash as opposed to credit cards. So, if you’re serious about getting out of debt, start by ditching the plastic and paying with cash instead.
3. Pay Off Your Most Expensive Debts First
If you have a lot of debt, it can be tempting to just make the minimum payments on all of your debts and call it a day. But this isn’t the smartest strategy. Instead, you should focus on paying off your most expensive debts first. This includes any debts with high-interest rates as well as any balances that are close to their credit limits (known as “maxed out” balances).
4. Set up a Budget
One of the best ways to get out of debt is to simply stop spending more money than you have. To do this, you need to set up a budget and stick to it. Figure out how much money you need for essentials like housing, food and transportation. Then, see if you can find ways to cut back on other expenses. Once you have a budget in place, make sure you stick to it.
5. Get additional streams of income
One of the best ways to get rid of debt is to simply make more money. If you can find ways to bring in extra income, you can quickly pay down your debts. There are a number of ways to do this. You could get a part-time job, start freelancing or even look into ways to make money from home.
6. Refinance Your Mortgage
If you’re a homeowner, one of the best ways to get rid of debt is to refinance your mortgage. Mortgage interest rates are at historic lows, so now is a great time to take advantage of this and lock in a lower rate. A lower interest rate means you’ll have more money each month to put towards other debts (like credit cards or student loans).
7. Use a Debt Snowball
The debt snowball method is a popular way to get out of debt fast. To use this method, you simply make the minimum payments on all of your debts except for the one with the smallest balance. Then, you put any extra money towards paying off that debt as quickly as possible. Once it’s paid off, you move on to the next debt on your list. This method can be effective because it gives you a quick win to help keep you motivated.
8. Use a Debt Consolidation Loan
Another option for getting out of debt is to take out a debt consolidation loan. This is a loan that pays off all of your other debts, leaving you with just one monthly payment. Debt consolidation loans usually have lower interest rates than other types of debt, so this can be a good way to save money on interest and get out of debt faster.
9. Get Help from a Nonprofit Credit Counseling Agency
If you’re struggling to get out of debt, you might want to consider getting help from a nonprofit credit counseling agency. These agencies can help you create a budget, negotiate with creditors and even consolidate your debts. Plus, they usually offer their services for free or at a very low cost.
10. Consider Becoming a One Car Household
One of the biggest expenses for many families is owning two cars. If you’re trying to get out of debt, you might want to consider becoming a one-car household. This will save you a lot of money on things like gas, insurance and car payments. Plus, it can be easier than you think to get by with just one car. Try carpooling, taking public transportation or even riding a bike.