Getting out of debt isn’t easy, and that’s especially true when you don’t have a money tree growing in your backyard.
But remember that 0So it’s fair to say that it’ll take some time to get out of it. This guide is 10 smart strategies to get out of debt.
It can take everything you’ve got to stay on top of your monthly bills and save for a rainy day, let alone make the monthly payments on your credit cards and other debts.
Fidelity’s 2020 New Year Financial Resolutions Study says that Americans are pretty optimistic about getting their finances in order.
According to the survey, 67 percent said they’re thinking about making a financial resolution, up from 61 percent a year ago.
One of the top things motivating us is the dream of “living a debt-free life.”
Fortunately, there are lots of nearly pain free ways to get out of debt. Some of the strategies outlined below can even be used together to help you smash that debt faster.
Smart Strategies to Get Out of Debt
Ready to get out of debt? Here are 10 great ways to get started.
1. Make More than the Minimum Payment
One way to speed up debt reduction requires making more than the minimum payment on your credit cards and other loans each month.
This strategy works well because the money that you pay over your minimum monthly payment goes directly toward the principal of your loan.
The more you pay each month, the faster your debts will be gone. Just make sure your lenders don’t charge a prepayment penalty before you try this.
2. Save Money on Groceries
To save some money and pay off your debt faster, try stocking up on groceries when they are on sale. Or go one step further and stockpile items that you use regularly when they are on sale, and then skip one grocery shop every month and live off of the food you stockpiled.
You can stockpile groceries like canned goods, cereal, and things that you can freeze like bread and meat.
Filling your cupboards when groceries are on sale and then skipping one grocery shop each month can save you up to 25% on your annual grocery bill. A family of four could easily save $2,300 to $2,900 a year by doing this.
Applying the money that you save on groceries to your debts, will definitely put you ahead in the long run!
The key to this strategy is watching for sales, only stocking up when groceries are on sale and freezing food properly.
When you “skip” a grocery shop, you will still need to buy perishables like milk, fruit, and vegetables, but hopefully you can skip the rest of what you would normally buy. If you can’t skip a shopping trip once a month, try for once every other month. That can still save you a fair amount of money.
3. Consolidate debt with a personal loan
Third in the 10 smart strategies to get out of debt is to consolidate debt.
If you have a lot of high interest debt, the best way to get out of it is probably debt consolidation with a personal loan.
This strategy involves applying for a personal loan with a lower interest rate, and paying off all your existing debts with that loan.
From there, you can focus on repaying all your debts with a single personal loan that has a much lower interest rate.
Personal loans tend to work well for debt consolidation and debt repayment, since they come with fixed interest rates, fixed monthly payments and fixed repayment periods.
Because it’s a fixed rate, you know exactly how much you’ll be paying each month and exactly how long that debt will take to pay off.
4. Transfer your balance to a 0% APR credit card
You should also think about transferring your debts to a new credit card that has a o% APR on balance transfers. Some of these cards will let you avoid interest for anywhere from nine to 21 months, even though some do charge a balance transfer fee upfront for the trouble.
With a balance transfer credit card, you can avoid paying interest and throw as much money as you can afford to your balance to pay down the debt faster.
Remember that your card’s introductory interest rate of 0% will eventually reset to the higher standard variable rate. Be sure to remember when that’s supposed to happen.
5. Ask your creditors for a lower interest rate (APR)
If you have credit cards with higher interest rates, asking your lender for an interest rate reduction can help. It’s possible your creditors will work with you in order to make your monthly payments more affordable. The worst they can say is “no.” What have you got to lose?
6. Make more money
If you’re tight on funds each month and can’t seem to earn enough money to pay extra toward your bills, it may be time to ramp up your earnings in whatever way you can. This may mean picking up more hours or shifts at work, but it could also mean creating a side hustle.
If you find a way to earn more money, make sure all the extra cash you bring home is used to pay off your debts. If you wind up spending it, you won’t be any better off.
7. Slash your expenses
While making extra money to use toward debt repayment is a smart move, cutting your expenses and finding new ways to save money can help you accomplish the same goal.
Cutting back on your spending can be easier and less time consuming than working more hours. Lucky for you, you can do both.
Start by cutting the “low hanging fruit” from your life, whether that’s reducing the number of times you eat out each month, cutting your grocery spending, or eliminating your entertainment budget until you’re out of the financial weeds.
Make sure you allocate any ‘extra’ earnings to debt repayment before you find another way to spend it.
8. Create a monthly budget
Creating a monthly budget can also be helpful if you’re trying to find money to use to pay down your debts. You may find that you’re spending a lot more than you realized in categories you have some control over, once you write it all down.
While there are plenty of budgeting software programs and apps, you can create a monthly budget yourself with a pen and paper. All you have to do is figure out your monthly take-home pay then write down each of your monthly bills, debts, and fluctuating expenses in another column. From there, get out old credit card and bank statements to figure out where all your money has been going and how you might allocate it better in the future.
Using a budget is a smart way to force yourself to confront your spending decisions in black and white — even if you don’t want to.
9. Use an app to save money on your monthly bills
There are some great apps available to help you make and save money. Billshark is one of those apps. It helps you lower your bills by as much as 25%! That’s money that you could put into savings or into your new home fund!
10. Stop racking up more debt!
Finally, don’t forget that you’ll never get out of debt if you don’t change how much you spend.
In other words, stop spending money you can’t afford to!
Consider switching to cash or debit instead of credit. And resist taking out new loans unless you absolutely have to.
Learn to live within your means instead of constantly using credit, and you’ll be a lot better off.