Money touches every aspect of our lives, influencing many of our daily decisions and even our relationships. But if you’re in debt, you’re not alone, and you can get out of debt in no time if you take the right steps.
In the U.S., very few schools teach personal finance, which means that most young people enter adulthood with money views entirely shaped by the examples set for them at home.
Without proper financial education, many people find themselves unsure of how to properly manage their money and often accumulate large amounts of debt.
Tips To Pay Off Debt Fast
The average American will have more than $90,000 in debt by the end of 2021. Over time, any amount of debt can take a toll on a person, whether or not you’re part of that staggering statistic.
The weight of debt can significantly increase stress levels and profoundly affect your daily life. While debt can have its place in building wealth when used strategically, it is an unwelcome burden for most people.
Trying to get out of debt can feel overwhelming. Still staying consistent and focused, you can pay off your debt faster than you ever imagined.
Here are tips to help you improve your financial situation and reduce your debt.
Live on a Budget
Maybe you’ve tried budgeting in the past, but for whatever reason didn’t stick with it.
Let’s say you are in debt or have very little income. In this situation, you may not earn enough to pay your monthly bills and basic living expenses, making it difficult to budget and manage your money.
However, making a conscious decision not to live on a budget can keep you living in a paycheck-to-paycheck loop.
Know that it’s normal to be afraid of the budget. A budget can feel limiting and restrictive, but it’s quite the opposite. Living on a budget gives you freedom.
Creating a budget can provide a plan to spend your money, and better yet, it can give you peace of mind.
But the best part about budgeting your money is that it allows you to spend guilt-free. If you’re struggling with overspending, learning to live on a budget will reduce the shame and self-loathing you may experience when it comes to spending money.
Experiment with different types of budgets until you find the one that works best for you. Committing to creating a monthly budget is one of the best things you can do to improve your financial situation and increase your net worth over time.
Pay more than the minimum
Paying more than the minimum on your debt can be a great way to reduce your overall debt and get out of debt faster.
By paying more than the minimum each month, you can reduce the amount of interest you pay, which can help you save money in the long run.
Additionally, making larger payments on your debt will help you reduce the principal faster, meaning you could pay off your debt much sooner than if you were only making minimum payments.
Ultimately, paying more than the minimum is a great way to save money and reduce your debt in the long run.
Keep Yourself Accountable
While it seems moot whether sharing your goals with others will help you achieve them, no doubt feeling supported as you work towards your goals helps.
The journey out of debt can be long and arduous, and having someone by your side to encourage you is critical to your success. However, you don’t have to – and you shouldn’t – do it alone.
Let’s say you are married or in a relationship that combines finances. In that case, you and your partner should work together to eliminate your debt. Your efforts together will be stronger than your efforts alone.
If you don’t have a partner or they won’t join forces, find an accountability partner you can trust.
Ideally, this person should:
- Have your best interests at heart and sincerely want you to succeed.
- Be a trusted confidant with whom you would like to share personal information.
- The financial situation is better than yours.
- Speak up if they see that you’ve made choices that don’t align with your goals.
Tell your accountability partner why you want to get out of debt and improve your financial situation. Ask them to check in with you regularly to assess your progress and ask them for advice when you get frustrated.
Pay more than once a month
Frequently making payments on your credit card bills above the minimum requirement can help keep you organized with regard to what amount you owe.
This tactic may also reduce your credit utilization ratio, which is a fraction of your total available credit being taken up at the present time.
This ratio is then considered by credit rating agencies when computing your credit score.
Pay off your most expensive loan first
The most costly loan you have is the one with the largest interest rate. If you prioritize paying it off first, then you are cutting back on the amount of interest paid and gradually reducing your overall debt.
Afterward, focus on settling debts with the next highest rates of interest to decrease the total cost. This approach is often called the “avalanche method” of repaying debt.
Consider the snowball method of paying off debt
The snowball method of paying off debt is a popular choice for those looking to become debt-free.
This method involves paying off the smallest debt first and then rolling the payment from that debt into the next smallest debt. This continues until all debts are paid off.
This method can be more motivating for some because it allows you to feel the progress of paying off each debt. Additionally, it can help save you money in interest payments since you are paying off the smaller debts first.
However, this method may not be the best choice for someone with a large amount of debt or high-interest payments since those debts will take longer to pay off.
Ultimately, it is important to consider your situation before you decide which approach to take.
Keep track of bills and pay them in less time
It is important to keep track of your bills and pay them in a timely manner. This can help you manage your money and avoid any late fees or penalties.
You can save time and money by setting up automatic payments for recurring bills, such as rent, utilities, or car insurance. You can also set up reminders to ensure that you don’t forget to pay a bill on time.
By staying on top of your bills, you can save money and eliminate the stress of having to remember to pay them on time.
Shorten the length of your loan
You may be able to reduce the total cost of borrowing and pay off your debt earlier by refinancing your loan into a shorter term.
Depending on your circumstances, you might be eligible for a lower interest rate or a different length of the loan.
Just bear in mind that if you choose to shorten the term, your monthly payments could become higher.
Consolidate multiple debts
Consolidating your debt can be a great way to reduce the amount of money you have to pay each month.
Consolidating multiple debts into one payment can help you manage your finances more effectively and save you money in the long run.
However, it’s important to note that you may end up paying more than once a month. For example, if you have more than one loan with different interest rates, you may have to make separate payments on each loan.
Additionally, if you extend your loan term, you may have to make additional payments throughout the loan.
Understanding how consolidating your debt affects your overall finances can help you decide if it’s the right choice for you.
Stop Using Debt
It’s certainly possible to charge responsibly, but for many, paying off debt early can be challenging as you continue to draw on debt and credit.
Applying for a home equity loan, student loan, leasing a car, and worst of all – continuing to use credit cards – can sabotage your progress. If you’ve become dependent on credit cards before then, stop using them until you can use them as a tool rather than a crutch.
While some financial gurus will pressure you to cut all your credit cards based on your financial situation, it may feel unrealistic.
If you’re unwilling to take this step, try one of the following alternatives:
- Freeze your cards in a bowl of water.
- Store your cards where you can’t easily get to them.
- Ask your accountability partner to keep your card safe for you.
- Ask your credit card company to freeze your account (you can “unfreeze” it at any time).
Using a large portion of your monthly income to pay off debt only to turn around and take on more debt the next month will keep you from achieving debt freedom.
Decrease Your Expenses
Cutting expenses can be challenging, especially if you’re already living within your means. It’s easy to blur the line between “want” and “need.” While trying to pay off debt, a significant portion of your income may go toward paying it off Pay every month.
Reducing your expenses will free up more income to pay off your debts, giving you more motivation.
Household expenses like grocery subscriptions and entertainment can be drastically reduced (or even slashed) to increase your monthly disposable income.
Expenses such as utility rent or mortgage and insurance premiums are “fixed” in that they remain the same from month to month and can in many cases be reduced with some effort.
Lower Your Insurance Rates
Contact your insurance company (Auto Family Life) and request a policy review to identify opportunities for reduced rates.
Another option is to contact an insurance broker. A broker represents multiple insurance companies, not just one, and can give you various quotes to compare.
Lower Your Utility Rates
You can take the same steps with your utilities like electricity gas internet etc. While these rates tend to fluctuate in some cases, you can sign up for a specific rate or opt for an annual payment plan.
Switch Cell Phone Plan or Carrier
The cellular market is highly competitive, and companies often offer extra fees or big bonuses to attract new customers. Ask your provider if you can switch to a different plan to save money or compare competitors’ rates.
Make sure not to get bogged down with expensive plans, unnecessary bells and whistles, and the most irresistible upsell – new phones and accessories.
Cut Your Grocery Budget
Since groceries and eating out are the top expenses for most households, you probably spend more on food than you realize.
Take the time to log every dollar you spend on grocery delivery and coffee delivery to keep track of your food costs throughout the month.
Even in this era of record inflation, high-spending budget categories often mean opportunities to save. So take action and implement some strategies to save on your grocery bills.
Increase Your Income
Living on a budget to pay off debt and reduce expenses will help you get out of debt faster, but working on increasing your income at the same time will put you on the fast track to financial freedom.
Sign up for overtime at your current job or find a part-time job to supplement your income.
Pick your favorite hobby and turn it into a side hustle to create an additional source of income. Don’t make it too complicated – figure out what you like to do in your spare time and monetize it.
Like to write? Start blogging. Love to bake? Offer to make a cake for your friend’s upcoming baby shower. Do you have an eye for photography? Promote the amateur vacation course on your Facebook page. Have a grammar trick? Become a freelance proofreader.
The Internet has given my generation endless opportunities to earn extra cash, and even create new businesses if you have the entrepreneurial spirit.
Final Thoughts
By following these steps and frameworks, you’re sure to pay off your debt fast and develop good financial habits.
However, if your debt is due to overspending or other underlying issues, it’s just as important to address those issues so you don’t put in the effort for nothing and find yourself coming back Indebted in the future.
