Getting out of debt isn’t an easy task. While, in theory, it might seem like a simple, step-by-step process, it can take a lot of time and determination to free yourself of any outstanding financial liabilities.
However, while it might be difficult, it’s certainly not impossible. In fact, there are many helpful steps you could take to get rid of your debt. Taking some of these proactive measures could help speed up the process and free you from this financial burden a lot sooner.
So, if you’re looking for some great tips that will help you get out of debt faster, read on!
1. Make a Budget
A detailed budget plan is a great first step towards getting out of debt. Indeed, by keeping track of your funds, you’ll be able to observe your spending habits, spot avoidable expenses and generally stay on top of your finances. With careful planning, you could end up saving a lot more money than you’d expect, which you could then redirect towards paying off your debt.
That said, you don’t need to be a spreadsheet whizz to create a thorough budget plan. In fact, there are several online budgeting tools out there that will make the process easier for you. All you’ll have to do is find one suited to your needs and set some new spending goals, and you’ll start saving up in next to no time!
2. Avoid Using Credit Cards
As long as you keep using your credit cards, your balance will keep on growing and your debt will inevitably increase. By limiting your credit card expenses, you’ll be able to get to the root of the problem and stop your balance from climbing further up.
In other words, if you want to take a big step towards eliminating your debt, you’ll have to stop swiping.
If you can’t fight the urge, though, you could (quite literally) freeze your credit cards and keep them out of sight – you can always thaw them afterwards. This could be a better option than closing all your accounts, which would only damage your credit score.
3. Ask for Lower Interest Rates
Negotiating a lower interest rate could decrease your debt significantly.
But before you ring up your credit card company, make sure you do a little research first. To begin with, check what rates are on offer and see if your bank can match their competitors’ rates.
If you have a good credit score and have been with your bank for years, then use it as negotiation leverage. It’s very likely that your bank will be reluctant to lose a loyal customer, and this could prompt them to negotiate these terms with you. That said, it’s also likely that you will be reluctant at first, so be persistent with what you’re requesting.
4. Do a Balance Transfer
If your credit card company isn’t willing to lower its rates, then you might have to look into other options. In fact, transferring your balance to a new card could be a very smart move, as you could potentially ditch your high-interest card to one with a 0% introductory APR for up to 18 months. This means that you could focus on paying off your debt without accumulating more payable interest over that period.
This method, then, could help you gain momentum and save you from any additional payments. However, do keep in mind that some card issuers will require you to pay a transfer fee before you can enjoy these perks – so make sure you do your research first!
5. Consolidate Your Debt
This is an ideal option if you have credit card debts, as it could significantly reduce the amount you owe in interest. By consolidating your debt, you combine everything into a single payment through a balance transfer credit card or a personal loan. From thereon, you would only have to pay a monthly sum directly to the credit card company or the lender.
There are several benefits to this strategy. For starters, you could get off with a potentially much lower interest rate. In other words, this could reduce the amount of interest that you’ll owe over time.
Plus, the process of paying off your debt will be a lot easier, as everything will be in one place. Before taking this route, however, make sure that it is more cost-effective than your current payment method.
6. Prioritise Your Repayments
If you have several outstanding debts and don’t plan on consolidating them into a single payment, you should be strategic about the order you’ll pay them in. There are two potential routes you could take to achieve this.
First, if you follow the debt avalanche method, you would be prioritising the debt with the highest interest rate while making minimum payments to all the rest. This method could potentially yield lower payments over time and save you a good chunk of money in interest payments.
The second route, meanwhile, is the snowball method which involves tackling smaller debts first to build momentum. This method is quite effective for low-interest debts, and it can give you a sense of achievement as you check items off your list.
7. Pay More Than the Minimum
A simple yet effective method to become debt-free faster is by increasing your payment amounts.
Paying the minimum amount means that you are prolonging the period you will be paying off your debt. This also means that you will end up paying a lot more money over time due to interest.
If you have a tight budget, increasing payments might not seem like a viable option, but a quick revision of your spending plan could help crank up those numbers.
If, on the other hand, you have the means to make the full monthly payments, do so! It will help you pay off your debts faster and save you a considerable amount of money in the long run.
8. Use Your Windfalls
Windfalls can range from spare change, inheritance, work bonuses and tax refunds. If you come across some extra income, it would be a good idea to use it towards paying off outstanding debts.
Although it might be tempting to treat yourself to other things, you’ll need to prioritise. If you’re motivated to become debt-free, you should redirect at least some of it, if not all of it, towards your monthly payments.
Remember: the more you invest in your monthly payments, the faster you will repay your debt!
9. Change Your Habits
Some of your habits could be costing you a lot more than you think.
Cutting back on small luxuries is essential for two main reasons. To begin with, the money you save every month can be redirected towards paying off your debt. Meanwhile, if you’re using your credit card to afford these luxuries, you’re also putting yourself in further debt. Breaking out of expensive habits, then, could help you escape this vicious cycle.
You might want to revisit your budget plan and consider cutting back on avoidable costs. These can span from things like cable TV, your Spotify subscription, online shopping or your daily coffee runs. Instead, consider alternative options like making homemade coffee, buying second-hand, and streaming online. Small lifestyle changes could have a significant impact on your finances!
10. Increase Your Income
While budgeting will help you manage your finances in a smarter way, increasing your earnings will help you make additional contributions to your monthly payments. The good news is that there are many ways to amplify your income.
For example, having a side hustle could help you earn a little more money every month. Alternatively, you could try selling things online, freelancing or getting a part-time job. Either way, an additional source of income will increase your financial fluidity and will have a positive impact on your outstanding debt.
Getting out of debt can be a gruelling process. While you’ll have to make certain sacrifices, a few lifestyles changes could stop your increasing debt in its tracks.
If you’re determined to be debt-free, taking a few proactive steps could certainly speed things up. Indeed, some simple adjustments to your habits and spending will help you make way into your financial freedom.
Have you got any other tips for getting out of debt? Share your ideas with us in the comments section below!