Debt, a four-letter word many of us know all too well. In fact, in America, the average debt a person carries is a whopping $90,460!
It’s time to break the cycle and create a better life and future for yourself. But where do you even begin?
Keep reading to learn how to get out of debt fast, smartly, and sustainably.
How to Get Out of Debt Fast
Get Organized
Before you can work on your plan, you need to know what you have to work with and how much debt you have. Start by calculating your net monthly income, which is the amount you take home after taxes and deductions. Next, make a list of all of your expenses and make note of the total amount owed on each debt (car loan, credit cards, student loans, etc.).
Lower Your Interest Rates
High-interest rates create a never-ending debt loop if you’re only making the minimum payments because such a large portion of the payment never goes to lowering your actual balance. A few options to consider for lowing your interest are:
- Shop around for cards with lower APR’s
- Look for cards with a 0% APR introductory rate
- Ask your bank if they can do a balance transfer with a lower rate
- Consider a personal loan to pay off all balances and consolidate payments
Lowering interest rates is one of the fastest ways to make an impact on your total debt amount.
Pay More Than the Minimum
If you’re unable to lower your interest rate (or even if you can) do your best to pay more than the minimum payment and request that the extra amount is applied directly to your principal balance.
Always double check to ensure that there is no penalty for paying off your balance early.
Stick to a Budget
Create a spreadsheet with your monthly bills and expenses. Once you know the amounts on the bills that remain consistent each month, decide what the absolute minimum is you can spend on the expenses that fluctuate, such as entertainment or clothing.
Pinch your pennies! Living the frugal life now will allow you to get out of debt and have a better life in the long run.
Increase Income
Consider picking up a short-term side job. Having an extra income that can be applied to paying off your credit cards will get you out of debt faster and lower the amount of interest you pay overall. There are lots of smaller things you can do that will help build your income – some ideas that are tried and true are taking surveys, selling your data online, working credit card rewards, and doing small side hustles like returning cans for the deposit money. A really good place to start might be reading quality debt blogs like www.bloggingawaydebt.com or Our Debt Free Family.com.
Know Your Rights
Unfortunately, there are many debt collection companies out there that have questionable practices, to say the least. Be sure to know how to enforce your consumer protection rights when met with a lawsuit.
Calling your employer, harassing you, and repeated billing is not okay and it is very helpful to have a knowledgeable company on your side to help navigate the debt resolution process.
Put It in Action
Now that you know how to get out of debt fast, put your plan into action! Gather your bills, research the ways to make your dollar make more of an impact through lower interest rates or consolidation options, and pick up that side gig you’ve been thinking of. Don’t forget, paying off your debt can take a great deal of time, so you’ll likely want to find a way to stay motivated in the long run. Inspired Budget and Modern Frugality both have good articles on this subject.
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