1. Establish (or revise) your budget
If you’ve never made a budget, the time is now. Make a list of all your expenses, including anything from school loans to your rent or mortgage payment. Remember to include lines for food and gas. After that, note your monthly income.
If you subtract all of your expenses from your income, the remaining money can be used to pay down debt. You are free to make as many updates to your budget as necessary. You can modify your budget as necessary if you receive a raise at work. Simply using it as a point of reference can help you stay on course.
Use programs like Mint or You Need a Budget if you need assistance. Another straightforward and quick way to manage a budget is with a spreadsheet.
2. Reduce your expenses
You might need to change your budget if you’re having trouble finding any extra money. If you give yourself $80 a week to eat out, for example, you might want to reduce it to, say, $50 a week and eat more meals at home. The additional funds can then be used to your outstanding debt.
3. Examine your subscriptions and monthly bills.
Examine your monthly subscriptions for anything you may not require and may not be utilizing, such as video streaming services that you could share with a friend or relative. Consider bundling related services, such as cable and internet or auto and house insurance, or look for methods to completely eliminate them.
Check your cable, internet, and insurance bills as well. It may be helpful to call your provider to check if there are any new discounts you can take advantage of to lower your monthly payment.
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4. Apply the debt avalanche strategy.
High interest rates are one of the main causes of debt as a concern. You might wish to use the debt avalanche approach to manage your debt if you have a lot of the same kind of debt, like credit card debt or student loans, for instance.
You will use this to write out every aspect of your debt, including what you owe, the minimum payment due each month, and the interest rates for each. Then, while continuing to make the minimum payments on your other bills, you’ll start applying every extra dollar you have to the debt with the highest interest rate. This process will continue until the highest-interest loan is fully paid off.
After paying off one loan, move on to the one with the next-highest interest rate and devote every additional dollar you have to it. Continue doing it until all of your debt, including credit card debt and student loans, has been paid off.
5. Utilize the debt snowball strategy.
Try the debt snowball strategy if, on the other hand, tiny successes are what really inspire you. The debt snowball approach starts with the smallest balance, whereas the debt avalanche method concentrates on the debt with the greatest interest rate.
You’ll write out all of your debt in the same way, but instead of paying more than the minimum on each loan, you’ll put all of your excess funds toward the one with the lowest balance. Pay off your smallest bill first, then go on to your next-smallest loan, and so on until all of your debt is settled.
6. Look for a balance transfer deal
Find a balance transfer offer with a 0% APR introductory rate to a new credit card if you have high-interest credit card debt. With this approach, you can pay off credit card debt without accruing any further interest.
Depending on the card you select, some debt transfers have a 0% introductory rate for anywhere between 15 and 21 months[a]. But bear in mind that the most of these offers come with a balance transfer fee, which could amount to up to 6% of the transferred amount.
You shouldn’t use the new card further while paying off this debt, and you should pay it off before the introductory period is out. You’ll be able to avoid going farther into debt thanks to this.
7. Market your goods
It could be time to sell some items you no longer need if you’re having trouble finding extra money in your budget.
Make a list of everything you have in your garage, closet, or any other storage space. Check to determine if any of your products can bring in a healthy profit. Start putting them up for sale online on platforms like OfferUp, Decluttr, Amazon, or eBay. Then you may pay off your debt with all of your earnings.
8. Apply a windfall of money
If you’ve been crushing it at work and your supervisor sees, you can get rewarded through a bonus or increase. Maybe you received a sizable tax refund. This is not only wonderful for your career, but also your debt.
You can utilize the money from your windfall to pay down debt or use the additional money you receive each month to make bigger payments. The additional payments you make on your mortgage, for instance, can assist lower your overall balance if you’re aiming to pay it off faster.
9. Take out a loan for yourself.
When you do so correctly, you can sometimes use a new debt to help you pay off an older one.
You might think about getting a debt consolidation loan if your credit is strong. A debt consolidation loan occurs when you take out a personal loan to settle all of your unpaid debt and continue to make payments on your personal loan until it is completely repaid.