Having a high amount of debt can be incredibly stressful. It can feel like a burden that never goes away, dissuading you from building your savings or splurging on things like a vacation when you could be using that money to pay off your debt faster. But the reality is that millions of Americans are living with debt and paying it off every day. It is possible to build a savings and even treat yourself a little while working to pay off debt.
The question most people have when it comes to paying off one or even multiple debts is, “What is the quickest way to do so?” The answer isn’t the same for everyone, because it depends on what your financial situation is and what the current market rates are. If student loans or credit card debt seem like they’re eating up all of your disposable income, there’s no need to get overwhelmed. Just follow these strategies:
Make A Large Payment
Finding a way to pay off a large portion of your debt right off the bat can be incredibly effective in reducing the burden both psychologically and economically. Selling some of your personal items or taking on a little extra work in order to use that money to pay off some of your debt can help you feel like your head is still above water, especially if you have enough to pay off one of your smaller debts entirely. If you can pay off one credit card out of a litany of debts you’ll be surprised how much more manageable the rest of it will seem.
Do Not Incur Any More Debt
The worst thing you can do when you have debt is to take on more debt. You need to learn how to live on your income or you’ll never be able to fully pay off the debts that you owe. Don’t take out any new credit cards and certainly don’t use a credit card to pay off your other debt. This can be a tricky rabbit hole that can lead you to financial bankruptcy and tank your credit. If you keep a close track of your finances and ensure that you’re spending less than you make each month, you can be sure to always have enough set aside to pay your debts without ever going in the red for the month.
Consider A Personal Loan
The one exception to not incurring more debt is if you’re able to find a way to pay off all of your debts with one loan that has a lower interest rate than your other debts. This is called consolidating your debt, and can be a great way to pay off a loan with a higher interest rate with a loan with a lower interest rate. Consolidating your debts into one loan with a low interest rate will reduce the amount you end up paying in the long run. Just make sure your income is high enough that you can afford the debt payments you’re currently making; if you’re falling behind, chances are that you’re going to need to make financial cuts more than you need a personal loan.
There are two methods for debt repayment strategies. The first one is the debt snowball method, which is the most common and widely recommended strategy for paying off debt. The debt snowball method entails listing the balances for all your debt accounts in order from the lowest one to the highest one. You then create a payment plan to pay off the account with the lowest balance first while paying the minimum payment for all the rest of your debts. Once the debt with the smallest balance is paid off, you move on to the one with the second-lowest balance and so on and so forth until all of your debts are paid.
The debt snowball method involves prioritizing your debts payments in order to start eliminating them one by one. Any extra money you have is allocated toward your debt in order to pay it off as quickly as possible. While you may end up paying more in interest in the long run by prioritizing debts with lower balances rather than ones with lower interest rates, the psychological victory of paying off a debt entirely can be incredibly motivating. This makes the debt snowball method one that uses momentum to keep you moving forward and paying off your debts as quickly as possible.
The other method for debt repayment is the debt snowflake method. This method is typically more popular for paying off a single debt with a very large balance. With the debt snowflake method, you make micro-sized debt payments on a frequent schedule to slowly reduce your overall debt balance. The idea is that making small payments on an incredibly frequent basis will make it easier to tackle paying off a giant debt.
Many people will use something called a “Gigs for Goals” method where they create a list of gigs to earn money to make these snowflake payments. Taking on freelance writing jobs or picking up an extra shift at work can all make you money that can be used to pay off your debt. Targeting your debt with the income from additional projects gives you the benefit of feeling like you’re taking action towards paying off your debt. This consistency can be habit-forming and can help you to be more conscious about your finances.
What Is The Best Way To Pay Off Debt?
Truthfully, the best way to pay off debt is whatever way you find you can stick to. Paying off debt requires a consistent amount of discipline in order to get you on solid financial footing. The key is to establish that consistency while maintaining a positive and optimistic outlook. Being in debt doesn’t have to be a psychological burden, and you should never feel as though you won’t be happy until you’re debt-free.