Planning your get-out-of-debt strategy is possible. With some basic changes to your plan of attack, you can get out of debt quickly, regardless of your income level.
However, turning around your financial situation doesn’t happen without some work. It needs commitment, a plan, and strong self-discipline. But luckily, it gets more manageable over time as you build better spending habits. These are some of the most powerful ways to get out of debt fast and achieve your money goals.
1. Use the Debt Snowball approach
Through using the debt snowball method your journey to being debt free is much more likely to be successful sooner. Start by listing your debts from smallest to largest and throw everything at the lowest debt first (of course pay the minimum on all debts). Then once the first debt is in the rearview mirror, simply roll that repayment power onto the next largest debt and so on — much like a snowball gathers pace and power as it rolls down a hill.
The success you’ll feel from clearing that first small debt is a Big Win. One step at a time you’ll see your motivation growing. This approach is different from the debt avalanche strategy, which focuses on high-interest debt first but it may take longer overall as you will not access the motivation that comes from the quick wins of clearing small debts first.
One of the main benefits of the debt snowball method is its huge motivational impact. Once you get started, the results come quicker — by removing several of your outstanding balances in only a few months – it supports you sticking with the plan. Also, the snowball method is easy to execute, as there is no requirement to compare the interest rate you’re paying on each debt; simply list your debts from smallest to largest.
2. Bargain for a lower interest rate
Ask your providers for a lower interest rate. Depending on your account standing and payment history, you will be surprised how many will be willing to decrease your interest rate or suggest a different card or loan facility that has a lower standard rate.
If you have kept a good payment history, you may be in a much better place to qualify for a lower interest rate. This can assist you in saving some money on interest payments as you pay down that debt.
3. Apply 100% of your tax refund to debt clearance
While it’s alluring to splurge the tax refund cheque on exciting and expensive stuff (most of which is a Want not a Need), a smarter money move would be to pay it all off your debt. Your tax refund isn’t part of your regular income so you’re not going to miss it, but you will enjoy jumping ahead with your debt clearance goal. Forget the short-term sugar hit of a consumer purchase and make real progress. This tip is not limited to tax refunds and applies to all extra lump sums you receive.
4. Consider Debt Consolidation (and then don’t do it)
If you’re swamped with several payments and feel like you don’t have enough income, you might be thinking of consolidating debt to reduce your monthly payments. It can work BUT you must be cautious about such strategies.
Debt consolidation loans might sound like a good idea but consolidating can leave you worse off than you began. Paying off the balances of five maxed-out credit cards and seeing accounts with zero balances can be tempting. Plus, the reality is that you’re avoiding the real problem, which is having a plan and controlling that person in the mirror. Without the combination of a written budget, implementing the Debt Snowball, plus having a proven plan to get you in control of your money, you may find yourself with more debt than before.
5. Cancel it!
Every time you pay off a credit card or line of credit, then call the company straight away and CANCEL it forever. This should be the sweetest call you make that week. Don’t let them talk you into staying – just tell them “I’m breaking up with debt and we can’t see each other anymore!”
It’s critical to remember that it’s not about how much money you make. High-income people can also struggle with their debt burden, and people with low incomes can live debt-free. Your spending behaviours can be adjusted to match your lifestyle. The sooner you create good spending habits, the better.
With the right plan you can get debt and financial stress out of your life forever. Would you like help?
