Last Updated on February 9, 2023
Debt is a major drawback to achieving financial freedom. According to Microcredit Summit, 55 percent of the estimated 189 million Americans owning credit cards are currently in credit card debt. Student loans are the other debt sector that has taken an upward trend over the last decade. At present, 44.2 million Americans have student loan debt.
With the rise of COVID-19 as a global pandemic, it becomes even harder to get things done without traveling further on the indebtedness bandwagon. More people than ever are concerned about how to pay off debts to set their being-financially-free ball rolling. Getting rid of debt requires commitment and persistence.
Here are several tips to help you pay off debt fast:
1. Pay more than the minimum.
Have you ever heard the phrase “the more the merrier?” Well, the concept applies to debt payment too. Instead of paying the $100 that is required of you monthly, strive to double that to $200 or more. If you increase the amount of money that you pay each month, your debt will disappear much faster. This strategy is useful because the additional pennies on top of your regular monthly payment go toward the principal balance.
Keep in mind that some lenders charge prepayment penalties automatically rather than putting the extra payment toward the principal. Be sure to confirm that the financial institution you use accepts principal-only payments before using this approach.
2. Pay off the smallest debts first.
If you’re one who’s motivated by small achievements when it comes to repayment, the debt snowball method is for you. This method allows you to clear the smallest debts first while paying minimum payments on larger loans. You can then move to the next larger debt as soon as you settle the smaller one.
Winning against something has a psychological effect. In this case, the “snowball effect” gives you a related feeling with each “win.” After the clearance of the small balances, you can direct your free dollars toward your bigger loans. This debt-reduction strategy works well when repaying revolving credit, which largely consists of credit cards.
3. Reevaluate your budget.
You need to recheck your budget if you are dead set on reducing your debts faster. Cutting your expenses as much as possible might deprive you of some luxury but also hastens your journey towards a lifetime of financial self-reliance. Do away with such habits as eating out, subscribing to cable television, and anything else on your “avoidable” list. Using cash instead of credit cards makes you aware of your choices when it comes to daily expenses.
A detailed budget is essential for tracking your income and controlling your expenditures. While on a strict budget, more of your earnings go toward making you wear the debt-free tag. If you find it hard to adjust your budget, seek the help of a financial expert. You can then free up more money to pay off debts.
Read more about the 5 simple steps to create a successful budget.
4. Sell the items you don’t need.
The majority of us have things lying aimlessly in our homes. If you can live without an item in your home, putting it up for sale is a perfect way to get some dollars for reducing your debts. Messing up your interior design a little bit is also a worthy option, considering all the benefits that come with being debt-free.
If your local authorities permit it, a garage sale is a traditional but effective way of selling your used goods without obtaining a business license and paying taxes. Such an informal event can attract passers-by or buyers responding to signs and flyers. You can also sell your items in online marketplaces like Facebook groups or your website.
Check out our tips on how to sell any product online.
5. Pull a few freelance gigs.
Getting some side hustle amplifies your efforts in paying off debts. Everyone has something that they are good at doing or able to do. You can turn skills such as lawn mowing, babysitting, and cleaning into huge streams of income. Look around your neighborhood and you’ll notice how much people need these simple services.
Online freelancing is another viable choice if you have impeccable abilities in tasks like content writing, web designing, and digital marketing. You can find clients on job boards and social media. Asking friends for leads can also help you rake in tidy amounts of cash using your expertise.
If you want to get clients fast, check out our 7 actionable strategies for finding freelance jobs online.
6. Ask for a raise.
You have nothing to lose if you feel like your boss needs to know that you deserve more pay. Before inquiring about any raise, do some research on the typical salary for your position using Google. Your chances of getting a raise are higher if you are known for your accomplishments at work.
Incorporating your goals in the conversation with your boss can increase the likelihood of positive feedback. The added salary gives you the means to get out of debt without cutting out any monthly expenses.
7. Stop the debt buildup.
Breaking your borrowing habit won’t get you out of debt, but it prevents your debt from piling up. The further you go with creating debts, the harder it becomes to make significant progress in settling them.
You should do something about the credit cards in your wallet if you are looking to manage your debts. A simple reminder note like “Don’t use me!” on your credit card can reduce your chances of borrowing money through it. Store away or freeze the cards in case you find it irresistible not to take additional loans.
If you’re struggling with debts, you may find yourself in a constant state of worry that impedes your ability to attract more income. Practicing these simple tips will spring you toward financial freedom sooner rather than later. All you need is a proper strategy that also favors your well-being. Being organized this way can help you settle the debts without having to put each penny you earn toward them.