Becoming Debt-free: 7 Practical Strategies to Take into Consideration
For various reasons, more people are actually in debt than we know. According to the Pew Research study, over 50% of Americans spend more than their earnings monthly. While this may not be the cause of debt for every debtor, it tells a lot about how people manage to find themselves in a situation that requires taking a personal loan or any other form of a loan. Some people had to take a loan due to the consequences of natural disasters and human-made strikes that led to difficult life situations. Such a situation may range from loss of a job, unforeseeable expensive home fix to a severe health condition.
When considerable debt happens, you may have to readjust your monthly budgets. Consequently, it will affect your spending power considerably. If care is not taken, an excessive amount of debts can affect life quality as you may lack the funds to cover the basic expenses in the long run. If you are already in an overwhelming debt situation and it's affecting your daily performance, you are advised to consider the tips discussed below. These ideas are proven methods of covering debts within a short period. Enjoy reading!
7 Practical Strategies
Consider paying beyond the least payment
Understandably, many individuals often settle for the minimum payment regarding a loan. However, the reality is that the lesser your payment, the longer you'll have to endure with the debt. For this reason, it's recommendable to pay more than the least payment if you have the chance. Paying more to cover your personal loans, student loans, or credit card debt will help save on interest across the loan span. Besides, this approach comes in handy in speeding up the payoff process.
For instance, let's assume you hold a credit card balance of $15,609 and an APR of 15%; you'll be remitting about $625 as your least payment per month. In this way, you have to deal with debt for about 13 years and six months. If you can increase the least payment, it'll considerably reduce the years and help cut down the interest. An important point to keep in mind is that some fast online loans lender may not accept prepayment. Otherwise, you may attract prepayment penalties. Hence, ensure that you ask your loan provider before paying more than the minimum payment.
Avoid expensive lifestyle
Living a luxurious life and keeping expensive habit is exciting and mood-lifting – for those who have financial power. If you don't have the financial stability to live luxuriously and, most importantly, you are trying to get rid of debt, then cut down your expensive spending habit. From today, you should evaluate your expensive habit of spending money and try to see where you spend frivolously. Cutting down many small financial details that you don't need will help reduce your expenditures in the long term. For instance, smoking and drinking excess alcohol are some lifestyle habits that you can do without – not to mention that they are harmful to your health. Also, preparing healthy food at home seems to be financially recommendable than buying a daily latte, restaurant lunch, and junk foods now and then. By removing these small details, it will reduce your expenses and increase your chance of becoming debt-free.
Consider the debt snowball strategy
This strategy will come in handy for people who want to increase their monthly payment on credit cards, payday loans, or other debts. With the debt snowball method, you can speed up the repayment process. First off, write down your list of debts from the least significant to the most significant. Now, gather your excess funds and cover your smallest debt while paying the minimum refund for the most significant debts.
Afterward, consider the next least significant debt, and get together your excess fund again to cover it. Continue using this method until you finally pay off all your debts one after another. The trick of debt snowball effect lies in the psychological effect. As you pay off the smallest debt, you'll have a "win" feeling and get motivated to cover your next debt. With more "wins" and extra motivation, all the debts will be cleared before you realize what's happening. Try it.
Consider a part-time job or side hustle
With extra earning from a part-time job or side hustle, you can amplify the debt snowball effect's implementation. Part-time jobs such as cleaning the house, serving as a virtual assistant, mowing yards, or babysitting won't take you more than a few hours. And interestingly, you can get a considerable income from the tasks. Besides, if you have a valuable skill such as website design, content writing, graphic design, etc., you can earn money on many freelancing websites – consider Upwork for a start.
Furthermore, people usually need help with farm jobs, planning a party, or scrapping grasses; all these services do not require special skills. Within some minutes, you can get it done and make some earnings from it. If you are concerned about where to get clients, check out TaskRabbit or any other similar websites. In short, consider starting a temporary job that can fetch you extra income to help speed up repaying your debt.
Pay off balances with "found money"
Don't get it wrong; "found money" is not a few dollars you see on the street. Instead, they are inheritance, work bonus, or annual raise, which come your way across the year. Found money can also be a fat tax refund during the spring. Regardless of the form, you'll do well to consider repaying your debts with the money. Using found money for debt refund won't affect your income or spending. And significantly, it will help cut down your repayment duration considerably.
Develop a prudent budget
A bare-bone budget may not sit well with many individuals. But if you want to get rid of debt fast, you should consider a very prudent budget. With such a budget, you willingly cut down every expense to the barest minimum and live with it for a period, most especially until the debts are off. Depending on your debt and income, a prudent budget is relative. However, it should not involve any extras or unnecessary spending, such as holding a picnic, cable television, or eating out. Remember that the bare-bone budget is temporary. Once your debt goal is achieved, you can revert to the regular budget.
Sell unneeded materials
Most of us have these items and materials that are just lying around our rooms and house. The funny thing is that some people actually need them. So rather than allowing the material to occupy space, sell them. Any money made from the sales should be diverted to your debt. From your old-fashioned laptop, grandpa's hat to the classic baseball bat, check out any consignment shop online to sell them. Also, you can reach out to an eCommerce retailer to help with the sales.
Start the journey towards freeing yourself from debt today by considering the points discussed above. The strategies are straightforward, practical, and effective. It only requires your implementation, commitment, and focus on getting them done. By harnessing the methods to get rid of your debts gradually, you'll soon be debt-free and have absolute peace of mind.