Nobody enjoys being stuck with debt, but unfortunately, many people are saddled with it. Student loans, medical bills, and mortgages place American families and individuals in a financial rut. That kind of debt can have devastating impacts on people’s lives for years and years.
If you’re one of the many people battling debt right now, you can overcome it. You don’t have to carry debt for the rest of your life. This article will provide a few financial tips you can implement to kick debt to the curb for good.
The first thing you need to do is make sure you’re not taking on any more debt. You can’t possibly hope to overcome your debt if you keep finding ways to spend money you don’t have.
Many deal with the urge to spend more than they earn. And signing up for new credit cards is a common way to do that. Credit cards are incredibly easy to use. Before you realize what’s happening, you’ve reached your limit and can’t pay it back. Thus continues the never-ending cycle of debt.
Of course, it can be almost impossible to avoid taking on new debt if you need an emergency medical procedure. Or if your toilet suddenly stops working. The truth is that emergencies happen, and they’re usually quite costly.
Building an emergency fund can prevent you from taking on debt. Consider adding a monthly sum to the fund. Or you can use your debit card with a round-up feature to add money to the fund with every purchase. Whichever way you save for it, an emergency fund can help you stop the debt cycle.
When paying off debt, there’s a minimum monthly payment to avoid a penalty. Missing a payment incurs hefty fees. Plus a late or missed payment will lower your credit score. So most people focus on making that minimum payment, but you shouldn’t stop there.
Making small, additional payments on top of the minimum requirement will speed up your debt repayment by that much more. All you have to do is find a little wiggle room in your budget. Instead of getting McDonald’s, put that $15 toward your debt.
This is another great use for a round up feature on your debit card. If you already have a solid emergency fund, use the rounded-up change to chip away at your debt.
Sometimes, what makes debt nearly impossible to pay off is the interest rate that comes with your loan. Interest continues to pile up as long as you have an outstanding balance. This means you eventually end up paying much more than the amount of the initial loan. On average, American credit card holders pay $855 a year on interest alone.
One way to get around bulky interest rates is to do a balance transfer. The explanation is in the name: you transfer your existing credit card balance to another account. This typically comes with a fee for the service. However, the lower interest rate could pay off in the long run.
For example, maybe you qualify for a credit card with a promotion offering 0% APR for the first 12 months. You can transfer your existing balance over, and pay it off before the interest rate kicks in. That may be well worth the charge required to initiate the transfer.
If you can’t get a credit card with a 0% APR promotion, you should attempt to renegotiate your current rate. You never know what options you have unless you ask.
Talk with your creditor about your situation. It’s likely they’ve had customers with similar circumstances. You may be able to make a plan and get a better rate.
Of course, your success here may depend on your record and your relationship with your lender. Did you generally make payments on time before this? How is your overall credit score? You’ll be able to make a good case for a new rate if you’ve been responsible in the past. If not, take some steps to show you’re a responsible borrower, and then make your case.
What was it that got you into debt in the first place? It could be an affinity for new cars or the urge to dine out at expensive restaurants every week. Whatever the vice, you need to reign in your expenses even after your debts are paid.
You’ve probably been told to make a budget before. Now is the time to do it. Write down a monthly or weekly spending plan. This will help you live within your means, and it will ensure that you’re paying your bills on time.
Oftentimes, the spending changes you make will end up being beneficial in more ways than one. For example, choosing to cook at home is usually a healthier choice for your body and your wallet. Look for affordable replacements for your pricy hobbies, like public yoga in the park rather than at a fancy studio.
Let’s say you have multiple loans to pay off. Figuring out how to approach them all is understandably frustrating and stressful. Deciding which debts to prioritize can help you establish a plan of attack. Plus it’ll help put your mind at ease.
The debt with the highest interest rates should be paid off the quickest. These sums may be smaller than other debts, but the high-interest rates will snowball fast. So you should prioritize those.
Make monthly payments on all of your debts. You don’t want to incur late fees. However, any extra money you have should be used to pay off that loan with the highest interest rate. Once that debt is completely paid off, you can then focus on the next loan on your list.
Remember that you won’t be able to make your debt disappear overnight. Be patient with your efforts. Consistency is key here — if you don’t continue to add to your debt, paying it down will be much easier. Nothing will compare to the moment you pay off the final dollar, and the weight of debt leaves your shoulders.