Are you wondering how to get out of debt fast? Then tackle one debt at a time! If you had to eat a big meal, you’d eat it in bite-sized chunks, right? The same goes for debt. Seeing all your debt as one big imposing sum can make your goal of “debt free living” seem impossible. However, if you break down your debt into smaller, more manageable pieces, you’ll find it easier to achieve your goal.
The following 5 tips will put you on track to a debt free future.
1. Acknowledge and assess
The process starts by first acknowledging that you are in debt and that you want to be debt-free. Then assess how much debt you have; this includes home loans, car payments, credit cards, student loans etc. Record how long you have to pay off each debt, the interest rate you’re paying on each of them and what your monthly payments are.
2. Create a plan
At this point, you have all of the information you need to create your debt repayment plan. Your plan doesn’t have to be complicated. Here are three important questions you must answer when creating a debt repayment plan:
- Beyond your minimum monthly payments, how much extra money can you put towards your debt each month?
- Which debt will you put that money towards first?
- How will you prioritize those other payments once that first debt is gone?
3. Track and control
This means tracking your spending and controlling your expenses. Paying off your debt will require a change in your regular spending patterns, especially if you want to pay it off quickly. The first step towards changing those patterns is knowing what you’re spending your money on in the first place. This will show you where you’re spending more than you should, and where you can cut off costs to free up some money towards paying off your debts.
4. Pay cash
Swiping a card for every purchase is easy, but it also makes it easier to spend more than you have. In your monthly budget, allow yourself only specific amounts for items like groceries, fuel and recreational purchases. Withdraw money to use so that you have a fixed amount to spend. The money left over in your account should be used to pay off large debts.
5. Build wealth
Once you start to track your spending, you’ll begin to see some extra money you can use towards paying off your debts or even to start saving. It may be tempting to treat yourself to something nice to wear, but don’t fall back into the bad habits that landed you in debt in the first place. Make your money work for you so that you can have no more debt.
An emergency savings fund is a great idea. This is your safety net for when life’s unforeseen circumstances hit hard. Could you survive a job loss? What about costly medical procedures? This is when it helps to have money readily available to soften the blow.
Each of these steps, taken alone, probably won’t seem like much. However, by putting these plans in place, not only will your debt decrease, but you will also have more money to spend on the things that really matter.
