The average American has about $38,000 in personal debt, which would exclude home mortgages. While there is variation by age and type of debt, there is no question about what a big problem is it in the U.S.
Debt can seriously impair your quality of life, and prevent you from reaping all it has to offer.
But, paying it off can become increasingly difficult without some guidance, and careful adherence to a few strategies. As hard as debt can be to get rid of, it is possible to pay it off fast and free yourself of its burden.
Ready to start your journey away from debt? Read on to learn how to pay off debt quicker.
How to Pay Off Debts Quicker
Everyone wants to settle their debts and doing so doesn’t have to take a lifetime.
Here are a few strategies to use to pay off debt fast and effectively, as well as some steps to take moving forward.
1. Estimate All Annual Expenses
The first crucial step for debt settlement is identifying yearly and monthly expenses.
You can start this on a spreadsheet, or by hand if you prefer. This step will help you identify all of the needs that need to be paid, rather than wants.
Only include what you can’t live without, as seeing your essential costs compared to your salary will tell you whether you are truly “broke”, or living beyond your means.
Moreover, add in estimates for wants on the side, as while these shouldn’t be used in the expenses sheet before establishing other goals, they will be taken into consideration once all else is considered.
2. Assess All Debt
Now that you have a basis for how much you earn, and how much your annual needs are, it is time to add up all of your debt.
Include everything, from student loans, to credit cards, to mortgages and loans. This may be a bit shocking once the final number is in front of you, but remember that this is just the starting point for your plan of attack.
As well, while the final number is important, you should also determine how much of your debt is high-interest.
Typically, credit card debt, car loans, and personal loans carry the highest interest and should be paid down first.
3. Create a Monthly Realistic Budget
Once you have an accurate picture of what you are working with in terms of income and debt, you can form a realistic monthly budget.
This is the time to spend hours pouring over bank statements to understand your spending habits.
Try to compile everything, including necessities and non-essentials. Identify areas you could improve the move on, and cut out things you can live without.
Then, find an amount that you would like to pay towards debt each month or week, beginning with the highest interest.
4. Set Up a Plan of Attack
The amount you will pay towards debt will also depend on the minimum amount you need to pay to avoid any fee’s.
Ultimately, start first with the smallest credit card or loan that you have that has a high-interest rate. Determine how much you can pay towards it based on the number above while accounting for all the minimums you need to maintain as well.
In finishing this initial debt, you will probably feel more determined than ever to continue the trend. Moreover, you can then close that account, and target the next highest interest rate.
Then, after all, high-interest loans and credits cards are paid off, you can start applying that amount to lower interest debt such as student loans and car payments. Plan to overpay each month, as ultimately, the goal is to unload that debt as soon as possible.
5. Freeze Any Further Debt Accumulation
It will do no good to pay down your debt if you continue to dig yourself in a deeper hole.
Therefore, hide all of your credit cards, and avoid the temptation completely. Force yourself to stick to the original budget and plan, and don’t buy something if you don’t have enough money.
Live like that is the only amount you have, and as if credit was not an option. This may be difficult at first, but your future self will thank you during this training period.
6. Create a Timeline for Payoff
After all the above steps are taken, establish a timeline for the final payoff. Be as ambitious as you’d like, and customize the goal to your situation.
Goals will help remind you of the progress you are making towards the bottom line, and each time you cut up a credit card, you become a bit more financially secure.
Ultimately, if the timeline based on the amount above doesn’t fit for you, adjust your lifestyle choices to pay more towards your debt. This won’t be easy, but it helps to remember it’s temporary.
7. Look for Opportunities to Side Hustle
If you’d like to really pay off your debt quickly, consider picking up a side hustle on top of your regular job.
The perfect side hustle will not require any additional pieces of training or equipment, and all of the earnings can go directly towards your debt.
8. Consider Debt Consolidation
In certain situations, debt consolidation in the form of a single loan can make the most sense.
This is especially true if you multiple credits accounts open with extremely high interest, or if you struggle to make the minimum payments for the several loans you owe.
With a single personal loans no credit check company, you can focus your efforts more easily, and end up owning less interest in the long run.
9. Meet with a Credit Counselor
A key component to paying off debt is improving your credit score. Scheduling time with a credit counselor can help you understand your options, as well as the total amount that you owe, and to whom.
10. Stay Positive
Throughout this process, remember to stay positive. Paying off debt is a season of life, and it does not have to be permanent.
The goal of this repayment process is to ultimately move beyond debt and to prevent it by all means necessary in the future.
In going through these motions, you will likely learn a lot about yourself, your relationship with money, and your lifestyle, and come out of the other side a better person.
Get Out of Debt for Good
Debt can be a pesky shadow that hangs over you, but it is feasible to overcome it with careful planning, and discipline.
A sound and realistic budget that establishes your expenses want, and debt ratio will help you begin this journey and stick it through until the end.
All and all, if you take your plan on how to pay off debts quicker seriously, the rewards are bound to come.
Ready to pave the way for a debt-free life? Check out our post on couponing to cut back on household expenses.