Are you deep in debt and desperately hoping to speed up your debt-repayment efforts? Here is how to do so painlessly.
Debt can destroy your financial dreams if you don’t work towards reducing it. Sometimes debt is a consequence of unintended spending such as overspending when on holiday. Other times it is because of unavoidable circumstances like an illness or losing a job. Whether you are buried in debt due to your fault or reasons beyond your control, getting out of debt is crucial.
Are you ready to step into your path of financial freedom? If yes, Lance Advisors suggest these possible ways of getting out of debt that you can consider.
1. Make a deliberate decision to stop borrowing money
If you want to climb out of debt, the first thing is to stop funding your lifestyle with borrowed money. People with lots of debt often find themselves adding on to the amount because they feel that either way, they already owe money. This means that there should be no more test-driving popular cars, no more signing up for more credit cards, and no more purchasing items you cannot afford to pay upfront. Avoiding debts will allow you to focus on paying the debt you already owe currently without increasing it.
2. Make the most of every dollar
Budgeting is an essential aspect of any financial plan, especially when you are paying off debt. The 50/30/20 budget is known to work wonders. Under this rule, you should dedicate 50 percent of your income to essentials such as housing. Allocate 30 percent for your wants and leave the remaining 20 percent for saving and paying your debt. Since you are currently working on getting out of debt, you can use some of the money in the ‘wants’ category to make additional debt payments. Lance Advisors believe that doing this will help clear debt faster and save on the payable interest.
3. Create a starter emergency fund
The importance of having an emergency fund cannot be overemphasized. If you do not have some money in a separate bank account for unexpected occurrences, the chances are that you will relapse back into debt. People who fund emergencies using credit cards and other forms of debt often end up unable to clear the balances. If you are trying to get out of debt, Lance Advisors suggest that you create a buffer in the form of an emergency fund.
4. Map out your debts
At this point, you will have made the necessary precautions towards ensuring that you will not get back into debt once you pay off. Now it’s time to figure how much you owe, who you owe and the payable interest rates. You can arrange your debts depending on the loan amount or interest that the loan attracts. The next step is to prioritize the debts. Being fully aware of the amount you owe is a critical step in getting out of debt because it helps you to strategize accordingly.
5. Consider debt consolidation
Learn about debt consolidation, what it entails and how it can help solve your debt problems. Debt consolidation involves combining all unsecured debts into a single monthly payment. You can do it using a debt consolidation loan. You will use the credit to clear your debts and then pay off the consolidation loan rather than the independent loans. You can also consolidate your loan using home equity.
Depending on the consolidation method you choose, the chances are that you will pay lower interest than before. You may also lower the monthly payment amount by lengthening the repayment period. The latter is a viable option if you cannot afford the installment, but you will end up paying more interest than if you did not consolidate.
6. Try the debt snowball method
If you want to clear more than the minimum monthly payments on your debts, consider using the snowball method. It will speed up the payment process and help you build momentum. The idea is to pay your debts starting from the smallest to the largest. Put all your excess funds towards clearing the lowest balance and make the minimum payments on your more sizeable loans. Once you pay off the small debts, you can move towards the next smallest debt until you pay off everything. After a while, the small balances will disappear, and now you can put that money towards clearing the larger loans and debts. You will be happy to have repaid some debts, which will boost your morale.
7. Use the power of extra payments
Whether you are paying off your student loan debt, credit card debt or personal loans, the easiest way to clear them quickly is by spending more than the minimum amount. Round off your debt repayment to the next whole number. When you do this, you will not only save on interest throughout the life of the loan, but it will also reduce the payoff period. Before making extra payments, ensure that the lender does not charge prepayment penalties and that you will not be overextending yourself.
8. Sell what you don’t require
If you are looking for ways to get money for repaying the loan, consider taking stock of your belongings. Many people have items that they do not use in their homes. Rather than filling up space for no reason, you can sell the items to jumpstart your debt repayment efforts. If your neighborhood allows it, consider having a yard sale. You can also use online merchants and social media marketplaces.
9. Get a side hustle
Consider any skills you have such as coding, creative writing, and web design. Research on how you can use these skills to earn some extra money. There are many side jobs you can enroll in apart from your 9 am to 5 pm day job. Things like renting your room on Airbnb, blogging, or signing up for affiliate marketing, require little effort but bring in lots of cash. If taking up a second job seems exhausting, make it your intention to make a few extra dollars towards the debt payments.
10. Throw any excess money at the debts
There are many times when extra money falls in your laps, most of which you had not factored into your debt elimination originally. For instance, payments such as tax refunds, inheritance and Christmas bonuses. When you receive such, make an effort to use them to clear your debts. Lump sum amounts will make a significant difference, and you will be out of debt sooner than you imagined.
11. Remain focused
Paying debt is not easy, and it might take a lot of time before you are entirely debt free. So, staying determined is usually the hardest step. Not everyone is privileged enough to pay their debt in a few months. So, if you are still dealing with the debt years after you start working on becoming debt free, do not give up. Lance Advisors believe that consistency will determine how successful your efforts are.
12. Celebrate your success
Reward yourself whenever you make a significant milestone in your debt repayment strategy. You do not have to spend a lot of money in celebrating your wins. You can merely have dinner with your friend or partner on a low budget. Celebrating will uphold your motivation and help you to remain focused.
13. Know your ‘why’
Think about your short-term and long-term goals. Your financial goals will serve as an ideal motivational factor. Remember that paying off your debts will help you to achieve these goals. Find as much inspiration as you can even before you establish a debt repayment plan.
It is easy to continue living in debt, especially if you do not have a reason to work towards getting out of the debt hole. The first step is to admit that your situation is unfavorable, and you need to get out of it. Whether you owe student debt, credit card debt or any other, understand that there is a way out. It might not change overnight, but a debt-free future is all yours as long as you make a plan and stick to it.