You’ve been working hard and have managed to save some money, so what should you do now? The best thing is to come up with a plan to get out of debt — fast. Let’s talk about how to face debt head on with strategic planning and smart action. Here’s how.
Pay more than the monthly minimum, pay less in interest
If you’re only paying the monthly minimum, debt will always feel like a weight that’s constantly dragging you down.
That’s because very little will come off the original amount owing (the “principal amount”) because most of your payments are going to interest. With the money you’re bringing in from your new side hustle or from some savings you’ve managed, no matter how small, you should try to pay more than the minimum. You’ll soon see your debt is steadily being paid off. It’s the difference between treading water and swimming to shore.
One good tip is to approach your lenders and see if they will lower your interest rate – if they do, you will end up paying less in interest and paying off your debt faster!
Break the habit of buying on impulse
Who hasn’t made an impulse buy on Amazon, or while strolling through the mall? We get a positive rush from seeing an object we desire and buying it. But while the high is short-lived, the debt is more long lasting.
Instead, try this: As you approach the cashier, or lift a finger to hit the “buy” button, stop and ask yourself: “Do I really need this? Is it necessary right now?” If you’re buying 20 items at the grocery store, how many of them are absolute necessities?
The best way to break bad habits are to create a spending budget and stick to it.
Cash only, please
Even if you’re trying to not use your credit card much or at all, sometimes you want to buy something online and you’d need a credit card for that. How about you make a promise to yourself to only use cash? Just avoid making online purchases – at least for a while – and when you go out shopping, leave the credit card at home. Using cash is easy and allows you to see the actual money leaving your hands and going into someone else’s, which tends to make you spend less.
Especially if you’re on a tight budget, it’s good to look at expenses that you might be able to reduce, even if for a short time while you work to pay off your debt. Some options are cutting out memberships and subscriptions, or bundling services such as phone, internet and cable, which usually bring a savings. Or you can scale back those packages for a while and go with simpler phone and TV plans.
Have a close look at basic household expenses. What about buying more products in bulk, buying generic products or shopping at discount stores? Hold off on clothing purchases and buying items for around the home. One good tip is to try to look at your monthly expenses and see if you can reduce them by 10% and use those savings to pay off debt faster. You might even find that some of those changes will be ones that aren’t that hard, and you can sustain them over the long-term!
These are simple strategies, but smart and effective ones that you’ll soon see could make a big difference in paying off your debt faster, and making you feel a lot better about your financial future.