Debt can feel like an overwhelming part of life to deal with. Maybe you take out a loan or make a few extra purchases on your credit card. The next thing you know, you’re in debt without any idea of how you got there or how to get out of it.
If you’re drowning in debt and wondering how you’re going to get out of the situation, know that you’re not alone. We all get in over our head. Take a deep breath, talk to a supportive friend and, if possible, seek financial assistance programs through free resources like SpringFour. There are things you can do that may help to ease the burden.
If you’re drowning in debt and wondering how you’re going to get out of the situation, know that you’re not alone. We all get in over our head. Take a deep breath, talk to a supportive friend and, if possible, seek financial assistance programs through free resources like SpringFour. There are things you can do that may help to ease the burden.
To start you off, we’ll walk you through the basics. But before you start to look for ways to pay off debt, it’s important to figure out what kind of debt you’re dealing with. You may have debt from student loans, credit cards, your mortgage, and more.
Then, you’ll need to get a clear idea of exactly how much debt you’re in. Having clear insight into these two factors can help you tailor your debt solutions to your situation. Now, let’s dive into some ways for you to start paying off your debt.
1. Use Your Budget Effectively
Once you have an idea of what kind of debt you have and how much of it there is, the next step is to get your budget sorted. If you already have an effective budget tailored to your financial situation, then you’re going to want to go over it thoroughly and see where things went wrong. Next, you’ll need to incorporate your debt repayment into your budget to stay on top of your payments.
But what if you’re in this position in the first place because you don’t have a budget? Now is a good time to make one. There are all sorts of different budgeting techniques out there, so you’ll have to do some research to figure out what works best for you. For example, if you have to account for the expenses of an entire family, a family budget may be a good fit. If you think using only cash would help regulate your spending, you may want to try out an envelope budget.
You can also look into some apps which can help you to build a budget.
2. Pay More Than the Minimum
With certain types of debt – usually revolving debt like credit cards and lines of credit – you’ll be required to make minimum payments. This is the minimum amount of money you’d need to pay to keep your account in good standing. But, if you want to make a bigger dent into your debt, you’ll want to try to pay more than the minimum when you can. The less you pay each cycle, the longer the debt drags out and the more you may end up paying in interest over time.
3. Focus on Your Debt with the Highest Interest Rates
Of all the debt you have, the debt with the highest interest rates may be costing you the most, so it might make the most sense to deal with those ones first. Start by listing out all of the debt you have and put it in order of highest to lowest interest rates. Then start chipping away at the highest on your list first, while meeting at least the minimum payments of all your other accounts.
4. Pause Your Credit Card Spending
If you’re having a problem with debt, the last thing you want to do is build up more of it needlessly. But for some people, the temptation of spending can be hard to fight. So, how do you deal with that temptation? One way can be to remove the option altogether.
Go through your wallet and take out all your credit cards before you leave your home to go shopping. You might worry that you’ll miss out on some of the perks that come with your credit cards, like cash back or air miles, but the negatives of building up more debt are probably going to outweigh the positives of earning these rewards. Don’t start using your credit cards again until you feel like you have your debt situation under control.
5. Put Cash Windfalls Towards Debt
Whether it’s your tax refund, a bonus from work, or a gift from a family member, it’s always helpful to get a windfall of cash. While most of us like to treat ourselves with small gifts, in the short and long term its better to use this money to pay off debt.
6. Find Ways to Save Money
Like we mentioned earlier, when you’re trying to pay off debt, it’s important to review your budget. Firstly, you want to see if there are any obvious red flags in terms of your spending, and then you’ll want to look for ways to save some money. But the idea of saving money may sound daunting when you’re already living on a tight budget.
You’re going to need to be thoughtful and mindful about this process, and also resign yourself to the fact that you may need to make some sacrifices. Some things that you may be able to do to help you save money include:
- Not spending more than you make.
- Paying yourself first.
- Focusing on saving small amounts.
- Automating the process.
If you want to read about these in more detail, take a look at our beginner’s guide on how to save money.
7. Get Rid of Unused Items and Use Profits Wisely
Another way to find a little extra money to go towards your debt payments is to go through your house and sell any items you don’t use, but that are still in good working order. To start this process, go through the following steps:
- Start by making a list of everything you want to sell.
- Research these items online to figure out what a fair price is.
- Take great pictures, write eye-catching headlines, and write concise descriptions.
- Post these items in different online spaces like Craigslist and eBay Inc.
When you start to see money come in from these sales, you can use it to help you pay off debt.
8. Be More Financially Responsible
There could be all sorts of different reasons that you’ve ended up with some debt hanging over your head. Sometimes things just take an unexpected turn, and you have no choice but to apply for a loan. First off, remember that this can happen to anyone, and if you feel anxious and isolated, you’re not alone. There’s always a path to get things moving in the right direction.
Put some time and effort into thinking about how you typically spend your money each day, week, and month. Ask yourself if some of these purchases are really necessary, or if you can do without them. Do you need to get a pricey coffee every morning, or would you be happy making your own at home? Can you start making lunch ahead of time to bring to work, or do you really need to eat out for lunch everyday? These may seem like small things, but they can go a long way over the course of time. Just do your best to stay financially responsible.
Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see CreditFresh’s Terms of Use.
