For most people, debt is something that hangs over your head, and no matter how hard you try, you simply can’t find your way to get out of it. However, debt requires more than just making payments every month; it requires having a solid plan of attack and ensuring you’re doing things the right way. If you are currently in debt, consider the following five tips to help you get out of debt as quickly as possible.
- Stop borrowing money.
When it comes to debt, it’s hard to say no to it. After all, it’s so easy to open up a credit card, take out a loan, or finance those larger items you want to purchase. However, if you truly want to get out of debt, you have to stop relying on it. For instance, stick to a cash-only basis and don’t borrow any more money. Pay for your bills in cash instead of putting them on a credit card. By doing this, you’ll be on your first step towards being debt-free.
- Have a plan.
In order to truly get out of debt, you need a plan. This means sitting down and figuring out the best way to pay off your debt. For some people, this requires the snowball effect. Using this method, you should list your debts in order from smallest to largest. Start by paying off the smaller debt first, and then put that monthly payment toward paying more toward your next smallest debt. Eventually, you’ll pay off your debt.
You can also opt for the laddering effect. This means you rank your debts in order from highest interest rate to lowest interest rate. By doing this, you will save money on interest payments over time, which can be a nice savings.
- Make extra money.
In order to truly pay down your debt, you need to find the best possible way to make some extra money and put that towards your debt. For instance, you can take on a second job, sell some of your belongings, or even locate local salvage yards if you have items you can sell for cash, such as old cars. Take all of this extra money you make and put it towards paying down your debt. This way, you can ensure you’ll be debt-free in no time.
- Stick to a budget.
One of the hardest things for people to do is to create and stick to budget. However, if you truly want to get out of debt, this is a necessity. Make a budget you can use for your monthly payments, and then find ways where you can even cut down on some of these monthly expenses. For instance, can you cut back on your cable or phone bills? Can you stop paying for Netflix or Hulu? Can you sell your car and take public transportation? There are plenty of things you can look for, so be sure to find the ways that work best for you.
- Don’t cut the ties.
After you have paid off your debt, especially credit cards, you may want to cut up those cards and close the accounts. However, if you do that, it can actually ruin your credit score and credit standing. Instead, you may want to cut the card so that you don’t get tempted to use it, but you definitely don’t want to close the account. Instead, leave it open with a $0 balance, as this will actually help improve your credit score over time.
Being in debt is not an enjoyable experience, but it’s something that many people go through. By using these tips, though, you have an easier chance of getting yourself out of debt and onto the right debt-free path.