If you’re having trouble managing your debt and don’t have a plan to pay it off, start here. These easy…
If you’re having trouble managing your debt and don’t have a plan to pay it off, start here. These simple ways to reduce your debt include expert-recommended financial strategies and simple tips to improve your financial habits.
Before you start paying off your debts, first make a list of each debt you owe, along with its type, balance, and interest rate. Identify if this debt is credit card debt, student loan debt, mortgage debt or something else.
Then start making a plan with these 14 easy ways to pay off debt:
— Create a budget.
— Pay off the most expensive debt first.
— Pay off the smallest debt first.
— Pay more than the minimum balance.
— Take advantage of balance transfers.
— Stop your credit card spending.
— Use a debt repayment app.
— Remove credit card information from online stores.
— Selling unwanted gifts and household items.
— Change your habits.
— Increase your income with a side hustle.
— Consider debt consolidation.
— Get help from a credit counseling agency.
— Avoid falling back into bad habits when you reach your goal.
1. Create a budget
To pay off your debt, start by tracking your income and expenses with a monthly budget.
A budget is an easy way to get organized at the start of debt repayment. Yours can be as simple as a spreadsheet or more complex, using budgeting apps like Mint to closely track every expense and debt payment.
2. Pay off the most expensive debt first
Tackling the most expensive debts first using a strategy called debt avalanche involves paying off debts with the highest interest rates first. During this repayment strategy, you should continue to pay the minimum on your other less expensive debts, but focus any extra money you have on the more expensive debts.
This strategy can save you money in the long run by getting rid of bad debts, like credit card debt, faster.
“Most Americans make suboptimal debt management decisions,” says Joseph Goetz, founder and chief information officer of Elwood & Goetz. “There are millions of American households sending in extra money for their mortgages when they have a car loan or a credit card at a much higher interest rate at the same time, and it’s costing them thousands of dollars over time.”
[SEE: Things to Do When You’re Deep in Debt.]
3. Pay off the smallest debt first
This strategy, known as debt snowballing, forces borrowers to tackle the smallest debts first. Getting started by paying off a small debt in full is easier than trying to take out a big student loan or mortgage debt, and paying off a small debt can provide the motivation you need to continue your debt repayment journey. debt.
Determining which debt to tackle first may depend on an individual’s financial stability and other factors.
4. Pay more than the minimum balance
To have a real impact on your debts, you’ll likely have to pay more than the minimum balance on your credit card statements each month. Debt management using credit cards, which usually come with high interest rates, can be extremely expensive.
You can also consider putting extra money on the principal of a mortgage, as long as those extra payments wouldn’t be better spent on other debts.
5. Take advantage of balance transfers
A balance transfer allows you to transfer your debt from one account to another, possibly taking advantage of low introductory rates. Applying for a new credit card and going through this process may not be possible for some people, depending on the card used and other options available.
This strategy is best if you know you will be able to pay off the balance in a short period of time.
6. Stop your credit card spending
If overspending is causing you to increase your debt unnecessarily, try removing your credit cards from your wallet altogether. This strategy is simple, but it can eliminate the temptation to overspend and allow you to focus on getting your finances under control.
7. Use a debt replacement app
Debt repayment apps like Tally and Undebt.it help users track their debts and provide a visual, easy-to-understand tool for paying off debts. In addition to these apps, take advantage of free credit reports and services that allow you to closely monitor your credit score. The major credit bureaus Equifax, Experian and TransUnion must make these reports available to consumers free of charge each year.
8. Remove credit card information from online stores
If removing your credit card from your wallet isn’t enough, take this self-policing step a step further by deleting credit card information stored online at sites like Amazon. Shopping online can be a real obstacle to getting out of debt, so take steps to kick the habit.
9. Sell unwanted gifts and household items
Find extra money by selling unwanted items from home. It’s easier than ever with stores like Poshmark and RealReal specializing in consignment clothing and sites like Facebook and Craigslist where just about anything can be bought and sold. Use all the money from your sales to pay off your debts.
10. Change your habits
According to Colin Moynahan, financial planner and founder of Twenty Fifty Capital, overspending and the accumulation of large debts are often behavioral issues. Be honest with yourself about your daily habits and expenses, then make the necessary lifestyle changes to start paying off your debts.
“You have your necessary expenses — food, housing, health — and then you have the discretionary stuff,” Moynahan says. “When we talk about avoiding debt, it comes down to priorities. Is it a necessary expense or a discretionary expense? If you really went through your statement line by line, I think most people would be surprised at how discretionary this is.
[Read: Inside the Psychology of Overspending and How to Stop.]
11. Increase your income with a side business
The bigger your shovel, the faster you can dig. Increase your source of income by taking on a second job or a freelance project, then use those extra funds to pay off your debts faster. Jobs like pet sitting, tutoring, or virtual assistant work are easy to get started and can provide enough money to reduce your debts.
12. Consider debt consolidation
Debt consolidation allows borrowers to repay their debt in a single loan with a single monthly payment. Consolidation may also lead to a lower interest rate, and it may be an opportunity to negotiate a better repayment plan on certain debts.
[Read: Best Debt Consolidation Loans.]
13. Get help from a credit counseling agency
Debt repayment can be overwhelming. Contact the National Credit Counseling Foundation for free debt management help.
“It’s a nonprofit network, and it’s a place where people can get help,” Goetz says. “A lot of people end up going to for-profit entities because there’s so much fraud out there for the vulnerable and heavily indebted.”
14. Avoid falling back into bad habits when you reach your goal
Once you have reached your goal, you will need to maintain your good financial habits so that you are debt free. Take the time to understand how you got into debt so you don’t end up there.
“The only way to really pay off long-term debt is to fix the underlying reason — usually spending, otherwise the debt is going to come back right away,” Moynahan says.
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14 easy ways to pay off debt originally appeared on usnews.com
Update 2/23/22: This story was published at an earlier date and has been updated with new information.