Here are some tips that will help you get started paying off debt the smart way and help you save extra money to pay down those debts even faster:
Assess the Situation
First, assess how much and what type of debt you have by writing it down using pencil and paper or entering the data into a spreadsheet like Microsoft Excel. Record the day the debt began and when it will end (check your credit card statements), the interest rate you’re paying, and what your payments typically are. Next, as painful as that might be, add it all up – try not to be discouraged.
Remember, the goal is to break this down into manageable chunks while finding extra money to help pay it down.
Identify High-Cost Debt
Even if you haven’t lost your job or experienced sickness related to COVID-19, it never hurts to identify which debt is more expensive than others and pay it off first. The usual high costing debts are personal loans, auto loans, credit cards with high-interest rates.
Credit cards are easiest to tackle so start with them first. Here’s how to deal with them:
- Don’t use them. You don’t have to cut them up, but take them out of your wallet, put them in a drawer, and only access the one with the lowest interest rate in an emergency.
- Identify the card with the highest interest and pay off as much as you can every month and pay the minimum amount due on other cards. When that one is paid off, work on the card with the next highest rate.
- Go over your credit card statements in detail and look for monthly charges for things you no longer use or don’t need anymore.
- Pay on time, absolutely every time.
S A V E ! ! !
Do whatever you can to retire debt – even if it means reevaluating your priorities and changing your lifestyle. Consider taking a second job and using that income only for higher payments on your financial obligations. Substitute free family activities for high-cost ones. Sell high-value items that you can live without.
Remove Unnecessary Items to Reduce Debt Load
Think twice before purchasing the latest high-tech gadgets. Do you need the latest Android Phone or iPhone? You’ll be surprised at what you don’t miss. Consider buying a used car, forgoing that expensive gym membership you can’t use for the meantime, only subscribing to one video streaming services that you use the most instead of having multiple subscriptions, – at least until your debt is under control.
Never, Ever Miss a Payment
Not only are you retiring debt, but you’re also building a stellar credit rating. If you ever get another job, buy a house, rent an apartment, or buy another car, you’ll want to have the best credit rating possible. A blemish-free payment record will help with that. Besides, credit card companies can be quick to raise interest rates because of one late payment and a completely missed one is even more serious.
Shop Wisely then Use the Savings to Pay Your Debt
If budget is really tight during these days, be smart on how you shop. Consider buying cheaper alternatives when shopping that will give the same or close amount of satisfaction. Make use of available promos, discounts, and vouchers small businesses are offering right now to save extra money.
For now, you should prioritize paying your debts so the load will be taken out of your back. It may seem like paying these debts won’t benefit you and will you only take money out of your pocket, but this will definitely help you in the long run.
If you need help managing debt or need advice regarding steps you can take to recession-proof your finances, help is just a phone call away.