Are you stuck with debt that seems to be growing instead of shrinking? How you attack debt can make all the difference. Since no plan works for everyone, We’re listing a few methods experts recommend to eliminate debt.
1. Stop Creating New Debt.
The debt cycle cannot come to an end until you stop borrowing money. Cut up your credit cards and stop making loans.
2. Pay more than the minimum payment.
Whether you’re carrying credit card debt, personal loans, or student loans, one of the best ways to pay them down sooner is to make more than the minimum monthly payment. Doing so will not only help you save interest throughout the life of your loan, but it will also speed up the payoff process.
3. Use the Debt Snowball Method
If you’re in the mood to pay more than the minimum monthly payments on your credit cards and other debts, consider using the debt snowball method to speed the process up even more and build momentum.
As a first step, you’ll want to list all of the debts you owe from smallest to largest. Throw all of your excess funds at the smallest balance, while making the minimum payments on all your larger loans. Once the smallest balance is paid off, start putting that extra money toward the next smallest debt until you pay that one off, and so on.
Over time, your small balances should disappear one by one, freeing up more dollars to throw at your larger debts and loans. This “snowball effect” allows you to pay down smaller balances first — logging a few “wins” for the psychological effect — while letting you save the largest loans for last. Ultimately, the goal is snowballing all of your extra dollars toward your debts until they’re demolished.
4. Cut expenses and live on a bare necessities budget
If you really want to pay down debt faster, you’ll need to cut your expenses as much as you can. One tool you can create and use is a bare-bones budget. With this strategy, you’ll cut your expenses as low as they can go and live on as little as possible for as long as you can.
A bare-bones budget will look different for everyone, but it should be devoid of any “extras” like going out to eat, cable television, or unnecessary spending. While you’re living on a strict budget, you should be able to pay considerably more toward what you owe.
Remember, bare-bones budgets are only meant to be temporary. Once you’re out of debt — or a lot closer to your goal — you can start adding discretionary spending back into your monthly plan.
If these steps are not enough,you may want to consider looking into some debt consolidation programs to make your payments more manageable. You can see what options Neighbors has available here.