How to Get Out of Debt Faster
Every month, when the statements come in, you throw them in a desk drawer rather than open them. You watch the balances grow. Debt collectors are calling. You’re being crushed under a mountain of debt and you don’t know what to do about it.
It IS possible to get out of debt, even a lot of debt, if you’re willing to work at it.
Stop Spending Money!
The first step to getting out of debt is to stop getting in. Take the credit cards out of your wallet and put them away. Vow not to use them. Move to a cash-only system – one reason people overspend with credit cards is because it’s easy to spend more when you don’t actually see the dollars changing hands. If you have to physically hand over cash, it’s a powerful reminder of real money leaving your pocket.
Forget Minimum Payments
Paying only the minimum monthly payments on your debts each month will guarantee you years of financial servitude. You’ll need to step up your repayment efforts and commit more than the minimum payment.
Roll it Over
An often-suggested trick for getting out of debt is the “rollover” or “snowball” method. Here’s how it works:
- Pick your smallest debt and target it first by paying more than the minimum monthly payment (keep paying the minimums on your other debts so you can focus on the small debt).
- Once this first debt is paid off, take the money you were paying on the first debt and apply it to the second debt…IN ADDITION to what you’re already paying on the second debt.
- Repeat the process
- As you pay off small debts, you’ll feel a sense of accomplishment, and you’ll have more money to apply to your other debts, until everything is paid off.
A fantastic tool to help you look at your debts and see what a rollover plan can do for you is this Debt Calculator.
Increase Your Income
Can you get overtime at work? Take on a part-time job? Even a few hours a week can translate to extra dollars to put to those debt payments. Do you have junk lying around that you don’t use and don’t need? A garage sale or selling items online can bring in extra cash, as well as clear up the clutter.
Decrease Your Expenses
If you think you can’t possibly scrape up a few extra bucks every month, think again. Stop going to the coffee joint every morning. Brown bag your lunch. Make your meals at home. Put off the purchase of that new car, new furniture, or new wardrobe. Rent movies instead of going out. Cut back the minutes on your cell phone plan. Cancel premium cable channels. Clip coupons. And so on.
Cash Out Savings
You may be loath to draw on a savings account to pay off debt. However, a savings account paying single-digit interest (or maybe even less) isn’t serving you if you have double-digit plastic.
Renegotiate
If you’ve gotten a great credit card offer in the mail, you have leverage to call your card issuer and ask for a reduction in your interest rate. If they won’t budge, consider taking that great new offer – but watch out for the interest rate when the promotional period ends.
Making a commitment to pay off your debt may involve some temporary sacrifices. If you feel like you just can’t do it, ask yourself what’s more important to you: buying what you want, or being free from debt?