If you are reading this article, you presumably have a debt to pay off. Northwestern Mutual, a financial security company, estimated in its recent report that the average personal debt among Americans sits at $21,800. Fortunately, there are plenty of things that you can do to break the debt cycle. A solid plan that includes financially sound strategies and a pragmatic approach will help you speed up the process of reaching a debt-free life. Here’s your concise guide that includes the best advice on how to pay off your debt.
1. Create a budget
Budgeting is a great practice that allows you to increase your savings, relocate your resources to necessary things, or even create a much-needed emergency fund. Create a list, use spreadsheets or budgeting apps to help you organize your expenses, and track your debt repayment. By analyzing your spending, you will gain fresh perspectives on your spending habits and figure out if you have money to pay off your debt.
2. Consider debt relief options
Debt relief companies can negotiate with the lenders and attempt to change certain terms of the debt repayment. Before choosing this option, it is wise to explore the other possibilities, as debt relief companies can result in more harm than good. This option comes with many disadvantages, including interest charges and late fees, as the debt relief company can urge their clients to stop paying the bills, and as a result, the lender can file a lawn collection lawsuit against you.
Tip: Whether you are looking for a lender on the Internet, checking out apps like the Payday Depot App, or going to your local bank, check the terms and conditions and ask for additional details when necessary.
3. Start with small debts
Before tackling your biggest debts, it is wise to start small. A debt snowball is a well-known debt repayment strategy that requires you to start by paying off the smallest debts. Debt snowball is a great way to ease the mental pressure of so many debts hanging over you, as it provides a much-needed source of motivation to continue repaying your debts.
4. Tackle high-interest debts
Another strategy to employ in your debt-repaying journey is the debt avalanche. Aimed at tackling the most expensive debt first, this strategy requires you to spend the extra cash on the debts with the highest interest rates. It makes sense to address the high-interest debts first, as they can end up costing thousands of dollars in the long run.
5. Cut back on utility bills and rent
One of the ways to start paying off the debt and saving is by reducing your monthly bills. For instance, if you want to reduce your utility costs, you can buy energy-efficient light bulbs, regulate the temperature in your home to prevent overpaying, choose cheaper tariffs, and switch providers. Or you can always unsubscribe from unused cable or Netflix subscriptions.
Starting with the side hustle and budgeting and ending with debt snowball and debt avalanche strategies, there are plenty of workable tactics and solutions that will help you repay the debt. By integrating these simple practices into the plan, you will minimize spending on trivial items, put money aside for an emergency fund, and start living a debt-free life.