Creating a plan to pay down your debt doesn’t need to be complicated. Most of the time it starts with a few small changes made consistently over time. Once you get the momentum going, you can really start making some headway on your credit cards and loans. Here’s some simple steps to get started:
1. Cut back on spending
Before we even start talking about strategies to pay down debt, we need consider cutting back on wasteful spending. Things like eating out too much, impulse buying and not tracking your money, can all lead to overspending. Cutting back on spending might only be temporary, just until you can get a better handle on your budget and debt plan.
2. Negotiate for a lower interest rate
Having the lowest interest rate possible will help ensure more of your money is going towards the principle balance on the loan. Call your bank or local credit union to negotiate for a lower interest rate. Many times credit card companies will offer a short promotion to customers; all you have to do is ask. Sometimes it’s only for a few months but that might just be the extra boost you need to jump start paying off debt.
3. Pay more than the minimum
Only making the minimum payments on your loan or credit cards could keep you in debt for many, many years. By simply doubling or tripling your minimum payments, you will have a significant impact on your debt balance. Below are some ideas of finding extra money:
- Bonus from work
- Change from a coin jar
- Selling stuff at a yard sale
Little by little, those increased amounts could shave off thousands of dollars in interest payments and save you years of being in debt.
4. Pay more often
Instead of paying your bill once a month, consider paying on your debt more often. Consider making an extra payment every week or twice a month, depending on what works best for your budget. For example, I get paid on the first and the fifteenth of every month, so I split the regular payment into two smaller payments, twice a month. Since I’m paying my bill more often, I’m actually paying less interest over time. Plus, since there are 26 weeks in a year, there will one extra regular payment made by the time the year is over.
5. Avoid common mistakes
As the saying goes, “it’s easier said than done” and when it comes to becoming debt free, this statement can be very true. Avoid common mistakes and lies about money like these:
- Creating an unrealistic plan
- Repeating the same behavior
- Not making an accurate budget
- Expecting the process will be quick and easy
Much like trying to lose weight, getting out of debt takes patience. It’s much easier to get in debt, than it is to get out of it. So start with a realistic plan and give yourself plenty of time to learn and grow.
6. Increase your income
You can only make so much progress by cutting spending and increasing your payments, until you need to increase your income. If you really want to knock out your debt quickly, consider taking on a part-time job, working more overtime at your job or making a hobby turn a profit. Whatever you can do to temporarily increase your income till you debt is paid down, will be worth it in the end.
The most vital step towards getting out of debt and creating a life you love is making a plan. It doesn’t have to be the best and most detailed plan; it just needs to be a good place to start. Once take that first small leap to become debt free, there will be no stopping you!