People with little to no debt are free from the stress of monthly interest payments and harassing phone calls from creditors. They find it easier to save money while also still having more money to spend to enjoy life.
But if you are buried under a mountain of debt, it can be difficult to find the path that leads you out of trouble. Fortunately, there are several ways to find that path and, with a little hard work, work your way to a life that is debt-free.
1. Be prepared for the long road ahead
Paying off your mountain of debt is not going to happen overnight. It probably won’t happen in a few months. In fact, it takes many Americans several years to pay off all of their debts and live a debt-free lifestyle. How long it will take you depends on a number of factors including how much money you can devote to paying down the debt and how much you owe. Bankrate offers a nice calculator to help you determine how long it will take you to pay off a credit card. Use it to help you plan your attack so you can pay off your debt as quickly as possible.
While traveling this long road, you could feel like you are very much alone. This could make you falter on the path along the way. It is important to remember that you are not alone and many people just like you are trying to claw their way out of debt.
2. Take control of your spending
Before you can move forward and pay off your debt, you must regain control of your spending. Remember, you are already facing growing balances simply because of the interest rates on your cards. If you ever want to get control of your spending and pay off that debt, you need to stop using your credit cards.
Knowing where every dollar goes is a huge advantage and it can help you put a stop to spending in areas that you might not have even known were a problem. Once you know how much money you need to live, you can begin to shift some of the income you used to waste toward your debt.
With your budget in place, you should look at each of your expenses. Do you really need that five-dollar cup of coffee from Starbucks? Is it really necessary to have cable or satellite television with every possible channel? Cutting back on just a few expenses like this can give you $100 or more that you can use to pay down your debt.
3. Look for other sources of income
Once you have gotten control of your spending habits, it is time to look for other sources of income to help you pay down that debt more quickly. For example, instead of using your yearly bonus check to buy a big-ticket item, allocate that money instead to paying down your debt. While not all companies offer this type of compensation, many do in the form of a holiday bonus or performance-based bonus. Consider this an easy way to pay down a good amount of debt each year.
On top of your annual bonus, go through your closets and clean house. Find anything and everything that you no longer need or want and sell it. Organize these items and take good quality photos and try to sell what you don’t want instead of just throwing it away. Collect the money from these items and use it to pay off a portion of your debt.
4. Pay off your debt
Now that you have a working budget, it is time to sort through your debt. Sort all your debt from highest to lowest. Credit cards often have high interest rates that can cost you a lot of money if you let the balance just sit there in the account. Pay off all your highest debts first to get rid of those expensive interest charges and then slowly work your way down the list.
When paying off your debt, it is important to always pay more than the minimum amount owed each month. Paying the minimum amount owed won’t help you solve your debt problem, it will only prolong your time in debt. Instead, pay more than just the minimum balance. For example, if your minimum balance due is $100, try doubling the payment to $200. By doing so, you will watch your debt drop much faster as your balance will drop much faster thus reducing the amount of interest you are charged in the process.
Choosing to climb out from under your debt is never an easy decision. However, studies have linked stress to debt, and this stress can take its toll on both you and your family. Making the choice to finally pay off your debt once and for all and living a life free from the burdens that come with living above your means can drastically change your life, reducing your stress levels along the way. There is a light at the end of the tunnel and by simply taking a few necessary though sometimes painful steps, you can pay that debt off once and for all and begin a life of accumulating wealth.