8 Tips to Help Eliminate Debt Starting Now
If you feel overwhelmed by your current financial situation, you’re not alone. A recent study found that the average American has over $100,000 in debt. We’ve identified eight strategies you can use to help reduce your debt load and get your financial situation back on track.
1. Put your spending on pause
Before you create a plan to reduce your debt, you have to push aside the temptation to make more debt. Put those credit cards in a safe place and don’t apply for any new accounts. If you want to take things a step further, you can put a freeze on your credit profile, which will prevent new accounts from being opened in your name.
2. Create a new budget and get your family involved
Take a look at your budget and determine whether there are ways that you can reduce non-essential expenses while getting out of debt. Do you need your entire cable TV package or all those streaming accounts? If you’ve been having dinner delivered, can you cook at home more often instead?
Once you’ve gone through the work of trimming your budget, sit down with your family, and discuss the new changes. Having everyone on the same page and accountable to one another will make it much easier to stick to the plan. It also eliminates surprises and bad feelings from dealing with spending cutbacks as they pop up.
3. Find creative ways to put more money toward your debt
When times get tough, sometimes you have to get a little creative when coming up with money to reduce your debt. Here are some ideas to consider:
|●||Get a part-time job or start a side business|
|●||Have a garage or yard sale|
|●||Sell any unused items you have lying around the house online|
|●||Put any refunds or cashback rewards straight to extra debt payments|
There are many ways to earn extra money that may help you eliminate your debt more quickly. Once you’re out of debt, you may have stumbled across your favorite new way to build your savings.
4. Only buy what’s on the list
Experts at the USDA estimate that as much as 40 percent of groceries Americans buy each year are thrown away. That’s a lot of money in the garbage. Create a meal plan for exactly what you think your family will eat each week and stick to it. The same thing for clothing, gifts, or other miscellaneous shopping. Have a plan before going to the store (or shopping online) of what you need to buy and then stick to it. If you need an accountability buddy, bring a friend or family member, or have them “approve” your online order.
5. Use cash only
Going to a cash-only spending strategy is a great way to keep yourself disciplined and on track for getting out of debt. You can further reduce temptation by putting the amount of cash allocated to each category of your budget into an envelope. Once that money is gone, any additional expenditures should be reserved until the next month.
6. Work with your creditors
Creditors are often willing to work with you to help repay your debts. Consider reaching out to your creditors to negotiate a potentially lower interest rate. If you’re struggling to repay your outstanding balance, you may be able to negotiate with your creditors to pay back a reduced amount.
7. Use the power of momentum to pay off your debts
If you can afford to pay a little extra on your debts, consider paying all the extra money against the highest interest rate balance while making the minimum payment on each of your other debts. Once that balance is paid off, take that payment and add it to the minimum balance on the debt with the next highest interest rate. Continue this momentum until you’ve paid off your last debt. Paying more than the minimum balance can save you years in interest costs and stress. Plus, once your debts are paid off, you can put that money toward saving and investing.
8. Bring in the experts
If your debt load seems too complicated or overwhelming to attack on your own, consider getting advice from the experts. A reputable credit counseling agency, like BALANCE, can help you develop an action plan to reduce your debt and create a roadmap for the best way to move forward.
Working with a credit counselor to get out of debt is not a short-term plan. The terms an agency negotiates on your behalf will typically result in payments over a period from three to five years. Of course, you can always work to make extra payments and get out of debt even faster.
Working your way out of debt can be stressful. Try these tips to help you get out of debt more quickly and get your family back on the road to a bright financial future.