If you’re reading this, you are probably feeling pretty helpless right now. Debt can feel like that…no matter what you do, it keeps coming back and sucking you under. I’ve been there. I know exactly how you feel. I also know how good it feels to get out from under that rock and start taking control. Let’s walk through some simple steps, many of which you can start today, to get on the path of becoming debt-free and finally reaching for the future you want.
Map out what you Owe and Understand The Terms
The first step in getting your debt under control is knowing how much you owe, who you owe, and what the interest rates are.
Make a list of every debt holder (i.e. American Express, Chase, Bank of America, etc.). Then, pull together all your most recent account statements and make a list or spreadsheet. The document should include the debt holder, the total amount owed, the interest rate, and any required minimum payments each month. This spreadsheet will start off your payoff journey, so make sure it is comprehensive and easy for you to follow.
Create a Budget
Many of us think of a budget as something only frugal people do. Well, it’s not, or at least it shouldn’t be. Try not to think of budgeting as restricting yourself—think of it as taking control. The best way to start out creating a budget is by keeping track of what you spend. This will help you understand where your money is going and where you can cut back. While you can do this by simply keeping a journal, these days, there are so many budgeting apps and tools out there that can help you, and it is absolutely worth taking advantage of them. Remember, a budget that does not allow for any enjoyment will not be sustainable. Make sure it leaves some room for some “treats” to ensure that you can stick with it and stay motivated. For tips on how to create a budget, check out these simple steps.
Decide how you Want to tackle your debt
There are a couple of popular methods for paying off debt:
- The Avalanche Method: Here, you focus on paying off the debt with the highest interest rate first while continuing to pay the minimum payments on your other debts. This method saves you money on interest over time.
- The Snowball Method: With this approach, you pay off your smallest debts first, gaining momentum as each balance disappears. This method can be rewarding and motivating, as you see results quickly.
Pick the strategy that works best for you. Personally, the snowball method worked for me, as I tend to get motivation from seeing results. However, if you’re someone who decides to calculate out the numbers and you’re able to see how much you will spend over-time with the high interest debts, you may be more motivated to try the avalanche method first.
Lower Your Interest Rates
It’s pretty simple: If you can lower your interest rates, you’ll be able to pay off your debt faster. While the avalanche method is a great place to start, there are other ways to speed this up. Consider calling your creditors to negotiate lower rates or looking at other options for debt consolidation. For me, re-financing my credit card debt onto a lower interest personal loan worked best. With a loan, not only were my interest rates cut in half, but I knew exactly how much I owed each month, and I had an end date when the debt would be paid off – seeing a light at the end of the tunnel is a pretty great feeling.
Another option for credit card debt is a balance transfer onto a lower-interest credit card (many have 0% interest on balance transfers for the first year). I would caution the balance transfer option if you are not confident you can pay off the debt within that first year at 0% interest. Many times, the rates skyrocket after that, and you will be left with the same, if not worse, debt situation.
Increase Your Income
While I would love to say that cutting expenses and lowering some interest rates will get you to the finish line, unfortunately, sometimes cutting expenses just isn’t enough. You may need to find additional income streams to help you reach your goals. This may be a part-time job or a side hustle you can do in your free time. I found that catering was a good option for this because you can pick your schedule ahead of time and earn decent money in an evening or on a Saturday afternoon. Even just 1 event a month can earn you an extra $250 (+/-).
The reality is that no one wants to take on a second job when they are already working 40+ hours a week. This results in the online search for “easy” money making opportunities you can do from home in your spare time. You’ll find THOUSANDS of these search results, ranging from online games to taking surveys to testing products…all of which will claim you can make good money in very little time with no investment. PLEASE be careful when looking at this “opportunities”. You’ll end up spending hours playing Solitaire or completing a survey just to realize you will need to spend all day just to earn $5 (if that). Not worth your time…trust me.
Just step back, do your research, and be smart. Cater, walk dogs for the neighbor or freelance on a gig site such as Upwork or Fiverr. Even just $100 – $250 extra each month will make a world of difference.
This Will Take Time. Stay Consistent and Be Patient
Paying off debt is not something that will happen overnight, but you will succeed if you stick to a plan. Follow your budget, keep an eye on your spending, stay consistent with your payments (DO NOT miss a payment), and keep your goals in mind. Celebrate small victories along the way to keep your spirits high. Remember, every payment is a step towards your financial freedom, and trust me, it is worth it.
Get Professional Advice
If you feel overwhelmed, there’s no shame in asking for help. A financial advisor can provide valuable advice and help get you on the right track. If you’re wondering how to get a financial advisor with no money, try stopping by the local branch of your bank. You are already a client of your bank, and there are typically multiple representatives on hand to chat with customers. This can be a free, easy place to start. Alternatively, if you are employed at a company with a human resources department, ask HR if you can talk with your investment representative. Often, employers have free resources available for their employees, you just need to ask.
Keep Looking Ahead
I know how it feels. It can feel like this is a never-ending cycle and that you will never escape it. But you can. I did. When you feel like you will never get out of this hole, just think about the future. Each dollar you put towards your debt will mean more financial freedom for your future. So, take a deep breath, get cozy, and start mapping out your plan. You’ve got this!
her money. her methods. 