Simple Tips for Paying off Debt Quickly
The feeling of having debt hanging over your head can be stressful. If you are behind on your payments, it’s even worse. Because Bankruptcy can cause serious problems with getting loans in the future, finding a way to pay your debt off as quickly as possible is the best way to alleviate the strain and put yourself back in the black again. Here are a few tips from Low Income Financial Help to help you give your debt the old heave-ho – Get more information about different debt relief options here.
Pay the smallest debts off first: This may sound counterintuitive. It seems like it would make the most sense to pay off debts with the highest interest rates first, but this isn’t always the best solution. Paying low debts first make it easier for you to get your first success. This success is a great way to motivate you to keep moving forward.
Debt stack: This method of paying off debt is called several different things including debt stacking and debt snowballing. Essentially, you keep making minimum payments on all of your debt, except one (your smallest debt). You add whatever extra money you can with your minimum payment until you get the debt paid off. Once that debt is paid off you take all of the money you were paying on that debt and apply it to your next debt. For example:
Debt A: $450 with a $100 minimum payment and $50 extra you scrounge up each month. (Total payment: $150).
Debt B: $1,000 with a minimum payment of $200. Total payment $200.
Debt C: $2,000 with a minimum payment of $200. Total payment $200.
First you tackle debt A. Once that is paid off (roughly 3 months, if you do the math), you take that $150 and add it to the $200 you are paying towards your $1000 debt for a total payment of $350. Once debt B is paid off you take the total payment of $350 and add it to the $200 payment you are already making towards Debt C. Now your payments are $550 and that last debt will get paid off much faster.
You aren’t spending any more than you already were; you are just combining payments as other debts are paid off to get your debt paid off faster.
Cut spending: You cannot pay off your debt if you keep your credit cards handy. Chop them up into a dozen pieces and start using cash. Additionally, curb your spending every month and use the money you save to pay towards your debts. This extra cash will help your debt fall much faster.
Motivate yourself: Keep a chart of your debts and track them as they get smaller and smaller. It may seem overwhelming at first but as you keep making payments you will see your balances start to shrink. As an additional motivator, figure out what reward you want to give yourself for paying off your debt. Once your debt is paid off you can use the funds you were sticking towards debt to save up for a vacation or other surprise. The best part is that you’ll be able to afford whatever it is without the worry of debt hanging over your head.