11 Jul Get out of debt in record time: our top tips
Life seems to be getting more expensive these days, even if our wages/salaries haven’t changed to reflect that. As a result, many of us have financed our needs and wants with debt.
What was once a one-time stopgap measure suddenly became a massive hole. You need to get out of debt and fast.
Have no idea where to begin? Follow along below and we’ll help you get out of debt in record time.
Pay debts from smallest to the biggest
Chances are you owe money to more than one creditor. Store credit cards, a mortgage, a car loan, an outstanding tax bill: all of these are burdens the average consumer may be carrying concurrently.
Because of the complexity of their situation, getting aggressive with regards to debt repayment can feel overwhelming at first. If you feel this way, listing your debts from smallest, as this will cut through your sense of unease.
Once you have defined the problem, you can go on the attack using the snowball method; simply put, it aims to create unbreakable momentum by retiring your smallest debts first.
This will serve to embolden you, as doing this will make it easier to wage aggressive assaults on larger balances.
Want to magnify your progress? Get on the phone with your creditors and negotiate a lower interest rate.
This might seem scary, but lowering it by even 1% per annum will allow you to make progress that much faster over the course of months or years.
Make more than the minimum payment
While it can be tempting to freeze your credit card in a block of ice, set up automatic minimum payments, and call it a day, it is important that you reject this passive approach.
Even if you don’t use your credit cards for a splurge or an emergency for the foreseeable future (unlikely), it will take over 30 years to pay off the average balance in this manner.
What’s more, the amount of interest you’ll pay will make you want to cry (the bank will as well, but theirs will be tears of joy).
Instead, commit to paying more than the minimum each month. Shoot for 2x starting out, then get more aggressive when it becomes clear you can handle bigger payments, and you’ll get out of debt in record time.
Slash your expenses to the bone
If you want to make aggressive payments that will clear your debts in a matter of months rather than years, you’ll need to spend less and make more.
With respect to the former, take every expense you have and put it under the microscope. Got cable? Cancel it – you can satisfy all your entertainment needs on the net these days.
Do the same if you have a gym membership, as floor exercises, free weights, and jogging is all you need to keep fit.
Streamline or eliminate as many expenses as possible, as every dollar saved is a dollar you can throw at your debt load.
Ask for a raise / increase your prices
While it is important to limit expenses, making more is the other side of the debt repayment coin. There are only so many expenses you can slash, especially if you are already living lean. When it comes to making money, though, the sky is the limit.
Are you an employee? Find ways to add value at work, then after a few months put together a proposal that makes the case for a substantial raise. Denied? Get a part-time job on the side or freelance at night/on weekends.
If you are an entrepreneur, increase what you charge for your services/products. If you are in a highly competitive niche, introduce a premium product and charge more for it.
You may lose some customers doing this, but most will stick with you, giving you plenty of cash to help you get out of debt in record time.