✔ There is a path out of debt. With a little time and discipline, you can become debt-free.
✔ Make the highest-interest debt goal Number 1.
✔ Know your money habits – ask yourself: Is this something I need or something I
want? If the answer is “wanted”, you may want to rethink that purchase.
✔ Making lump-sum payments, increasing your payment frequency or setting up automatic payments tied to your paycheque are all ways you can pay off debt faster.
Being in debt does not have to be a permanent way of life. There are paths you can
take that lead to debt freedom, and they all come down to knowing where you are,
where you want to be financially, and which direction to take. Here are a few tips and
ideas to help you pay off your debt faster.
1. Understand what you owe
Money is not mysterious, you can add it up and get to the bottom line, every time. It’s as
simple as looking at your bank statements and seeing exactly where your money goes.
Take a few minutes to list your current debts and write down the interest rate you are
paying beside each one.
Paying down your debts with the highest interest rates should become your Number 1
goal so that it stops accumulating every month. Your Number 2 priority is always paying
off more than the minimum required whenever you can.
Here’s why: It will take more than 11 years to pay off a $5,000 credit card balance if
you only make the minimum payment each month and it will cost you $13,700.
2. Stick to what you need for now
Buying things you need and cutting back on things you simply ‘want’ is always a good
money habit to adopt if you’re struggling to lower your debt. You don’t have to do it
forever, just until you have less debt and more money in your pocket.
Here are a few ways to temporarily lower costs without feeling like you have to give all
the fun stuff:
- Stick with last year's clothes.
- Get one more year out of your phone.
- Put one of your streaming services on hold.
- Give up subscriptions that aren’t essential.
- Bundle services such as phone, internet, and cable, which usually bring savings.
- Shop around for cheaper phone, streaming and TV plans.
Reduce your household expenses by 10 per cent and use the money to help cut back
3. Paying down debt with lump-sum payments
A lump-sum payment is one that you make above and beyond what you’re normally
doing to lower your debts. For example, if you got a tax refund, sold something online,
or got a bonus at work and used it to make a one-time, extra payment on a loan, that
would be considered a lump-sum payment.
When you make a one-time payment, you save money over time because the interest
you pay on debt is always based on the amount you borrowed. After making a lump-
sum payment, the amount of total interest you still owe will be less.
For example, a $2,000 lump-sum payment on a $10,000 car loan at 5.5 per cent, would
let you pay it off in four years instead of five.
Make a few changes today for a better tomorrow
Cutting back on a few things now, and working on some financial habits that can lower
your costs and good ways start paying off debt faster. If you’re still struggling, consider
speaking to an easyfinancial representative about managing debt with a debt
Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.