Everyone has debt, only it comes in the form of student loans, credit card debt, car loans, and other things that cost people money. Debts are one of the burdens that people just can’t seem to get rid of. However, though sometimes there’s no way to resolve such problems, there are actually ways by which people can ease their debts and pay them at a faster rate.
1. CREATE A LIST OF DEBTS BASED ON INTEREST RATES
One notable problem of people who have debts is just they just stow away all the bills that arrive at their doors. Little do they know that having information regarding is great factor that can aid them in paying off their debts. Thus, the first step that they must do is to arrange their debts based on interest rates, starting from the largest to smallest.
Then, they should further organize the lists into debts with higher interest rates to those with smallest ones. Basically, higher interest rates mean that people will have to pay more money. Thus, they should aim at paying those with higher interest rates first.
As soon as they accomplish the list, debtors will have an idea which of their debts should be paid first to save more money.
2. ACCOMPLISH EMERGENCY SAVINGS FUNDS
Emergencies are unavoidable and they can happen anytime, especially during those moments when almost everyone is not expecting them. Thus, people should be always prepared in case of emergencies, and this preparedness entails having emergency funds.
Emergency funds are useful for unexpected expenses or bills. People should only utilize these funds when something really unwanted occurs. On the other hand, when people cannot help but utilize their emergency funds, they should aim to put in some money again before paying some more debts.
3. ENSURE THAT MINIMUM MONTHLY FEES ARE PAID
People are advised to pay minimum monthly fees to avoid incurring higher interest rates and late fees. Thus, if they are aiming to pay first those debts with higher interest rates, more money should be paid toward those debts every month in addition to minimum fees allotted for other debts.
4. BUDGET YOUR MONEY AND AVOID BUYING ANYTHING UNNECESSARY
Though people may think that budgeting is a sign of depravity, it is actually an effective method of correctly appropriating money. This way, people will have an idea where every cent goes to.
To start budgeting, people should look first at their previous month’s expenses. They can use their bank or credit care statements. Budgeting can be done on Excel or through apps, such as Mint. Then, people may start with creating categories for their expenses. Categories are very useful in setting limits to expenses. When budgeting, people should never forget to factor in their income to ensure that they will not spend more than they can afford.
On the other hand, some people may prefer the old-fashioned way of budgeting. They can use the envelope method, which is an effective way of managing money and minimizing expenses.
5. LADDER YOUR DEBTS
As mentioned, people should focus on paying debts with higher interest rates first. Then after the debt with highest rate is paid off, people can use the fee for that debt on other fees that must be paid. In this manner, they can finish paying all their debts at a faster rate. Moreover, people will become more motivated to pay their loans once they tick off those debts with higher interest rates.
6. TRY DOWNSIZING
Downsizing for a while can also help in paying debts faster. For instance, people can assess their. expenses and identify the things which they can live without for a while. Such expendable things may include monthly subscription services or eating out in fancy restaurants.
7. SELL OLD ITEMS
Having a garage sale is an easy way to earn more money. People may have things in their house that only take up space and that they do not really need anymore. Selling old and unused furniture and other household items can bring in money, which can be allotted for paying off debts.
8. TRANSFER BALANCES
People should consider transferring balances while they are still paying their debts. However, minimum fees must still be paid and balances should be paid as well before expiration of introductory interest rate.
In case that they need help, people may consult Consumer Credit Counseling Service for free credit counseling and debt management service. The fee is around 3% to 5% monthly and is nothing more than $50.
9. LOOK FOR ANOTHER SOURCE OF INCOME
If they can, people should try looking for another job to increase their income. However, people should not get multiple jobs if they do not want to, they can just do it in order to pay off their debts at shorter period.
10. GIVE YOURSELF SOME REWARD FOR YOUR HARD WORK
Instead of thinking of debt payment as burden, people can still have some fun while eliminating their debts. For example, if they accomplish paying certain debts, especially those with higher interest rates, then it will not hurt if they treat themselves a little. They can do something fun that will not require them to spend that much money. Rewards serve as good motivation so people will be more inspired to pay off their debts as soon as possible.