Occasionally, you will hit the rock bottom—financially. I guess you’ve been there at some point. Those moments when your debts accumulate to great heights where you can no longer manage them effectively. You’re not alone. Many people are facing the challenge off paying off debts. In fact, debt management is the leading cause of failure of many small business enterprises so if you are starting a business you may struggle with debt management at some point. Here are some 10 tips you can use to pay off your debt.
1. List Down All Your Debts
List down all your debts and then arrange them from the smallest to largest. Make another list arranging the debts from the one with the highest interest rate to the one with the lowest interest rate. After figuring exactly what you owe, start by paying off the debts that have the highest interests first. The debts with highest interest are expensive because in the end they affect the total amount to be repaid in a big way, so put all your focus on them as you continue settling the minimum monthly payments of the other debts. Continue with this trend until you clear off all your debts.
2. Make a Budget and Set Goals
Since you already know exactly what your debts add to, make a plan on how you want to settle the debts within the shortest time. Make a budget. Using a spreadsheet; preferably excel, list down two columns, one for income and the other expenses. Scrutinize your expenses thoroughly to see the unnecessary expenses that you can cut off or reduce. Set a goal on how much you want to spend on mortgage, gas, fees and other expenses. If you successfully achieve these goals, reward yourself lightly at the end of the month or whichever period you wish. Rewarding yourself is a form of motivation, do not take it for granted.
3. Keep Your Credit Cards Away
You are in so many debts because you keep buying things that you didn’t plan to, using your credit card. You need to put an end to your credit card spending immediately. Keep away the credit cards from your purses and wallets, or at least leave them at home in some drawer and forget about them until you have your finances under control. Top-notch economists advise that you need to freeze the credit cards in a bucket of ice. Purchasing things with cash will help you separate your wants from your needs. Remain conscious of your spending and think twice before you spend money.
4. Freelance on Your Free Time
You are on a very tight budget and indebted because you only rely on one source of income which is often insufficient to settle all your bills. Create time for a side hustle. Try working online after work. Work extra hours in your office and get extra pay or even pay rise. Chanel all these extra cash you earn towards paying off your debts. Do not throw a party or plan a vacation when you receive a work bonus. Put all bonuses towards to paying off your debts fast. The period of paying off debts is really frustrating, try with all you might to make it as short as possible by putting all your disposable towards settling the debts.
5. Increase Payments on the Minimum Balance
You really don’t want to keep paying for your debts for a very long time. If you want to settle your debts faster than its allocated time, strengthen your commitments by making weekly payments instead of monthly. You can also try and double or triple your minimum payments, that is, if $200 is your minimum monthly payment towards your debt, try and pay $400 or more.
6. Consider a Balance-Transfer
There are Credit cards that offers a promo of zero-interest on balance transfers for some period of time. You could be paying up to 17.5% APR as interest charges. The good news is that you can have a 0% APR offer when you are newly transferred to another credit card. Most credit card transfers include the option of transferring balances. Take advantage of the promo period and pay the monthly subscriptions normally to avoid interest charges.
7. Change Your Habits
You are so much in a fix and indebted because of your spending habits. If you don’t change these habits, you probably will spend your whole life settling debts. Sit down with a pen and paper in hand, jot down your daily routines and mark those which require money. If you cannot cut off completely on these areas, then reduce your expenditure on them. For instance, do you go for unnecessary road trips with your friends, or pass by a local inn every day after work to buy drinks for friends? If yes, then this could be one of the reasons you are in debt. Chanel these extra cash you spend on gas and drinks toward paying off your debts.
8. Sell Unused Household Items
You probably have some electronics that are in good condition but you no longer use or some gifts you didn’t fall in love with and are catching dust in the house et cetera. You can sell off these items and channel the money generated from them towards paying off your debts. The easiest way to sell off these items is by taking high quality pictures of them, write a good description of them and sell them cheaply online or to friends.
9. Renegotiate the debt with Your Creditors
You don’t want to default on your loan or be declared bankrupt; because that means for ten years your credit record will contain this information and your loan request may not be approved even in case of an emergency. Explain to your creditors your situation. Talk them into giving you less stringent terms with lower interest rates and longer payment periods. Creditors will always help you to ensure that you pay your loan to protect themselves from a total loss when you file for bankruptcy.
10. Use savings to Pay off Debts
You have tried all you can towards paying off your debts but you still owe your creditors a lot. Take the risk, break your savings account and pay off your debts fast. After you have paid off your debts, you can always start saving again.