Debt is a problem that many people have and it can be hard to get out of. However, there are many ways to kill debt fast. These 10 ways will help you get out of debt and start saving money. Debt in the United States is very concerning. It’s been said that Americans owe $1.48 trillion dollars in credit card debt alone. That’s more than the Gross Domestic Product of Russia and Canada combined!
1. Start tracking debt
Make a list of all the debts you have, and how much they cost in interest per month.
A lot of people will be surprised to find out how much their debts cost them in interest each month. It is important to know what percentage your debts are costing you, as well as the total amount you owe. This way, you can make smarter financial decisions and possibly explore debt relief options.
2. Start budgeting
Figure out how much you can afford to spend each month on your bills and other debts, and stick to it. . It’s also helpful to figure how much you can afford to spend on your savings each month. Stick to a budget. Create a budget with your partner or whomever is responsible for the finances in your household, and don’t exceed it.
3. Renegotiate and reduce interest rates
You can look at negotiating your interest rates down with your creditors, or refinance your loans at a lower rate with another lender , you can pay off your debts faster. Using a credit counseling service, can help you negotiate a repayment plan with your creditors. With the help of a credit counselor. If you cannot negotiate a lower rate or refinance, or if the total amount of your debt is too large, consider filing for bankruptcy. You should also contact an attorney to discuss bankruptcy options.
4. Debt consolidation
If you’re paying high-interest rates on multiple debts, consolidate them into one low-interest loan from a bank , a credit union, or a nonprofit. If you no longer have a steady income, consider breaking your debts into smaller amounts and paying them off more quickly. Consider cutting down your discretionary spending, and think about other ways to make money. A steady income will help you to put more in the savings account. In case of a bad credit, you can also get a secured credit card to improve your score.
5. Cut expenses
Expenses should be categorized into necessary and unnecessary buckets. It is better to maintain a excel sheet along with the expense frequency. E.g. Daily or weekly expense. Savings by not having a cup coffee or buying a pack of cigarettes can be be easily achieved. This visibility will go a long way in helping you identify strategies to limit them. One of the helpful strategies is to drop the saved cash into a piggy bank on a regular basis.
Once the unnecessary expenses are saved, use it to repay debt. When done over a long period, you will be surprised at the amount of savings in your bank account.
6. Side hustle income
Having a side hustle has many benefits. It helps in diversifying risk while helping you build new skills. Try to make your hobby a side hustle. It would really sustain over a period if you like doing it. There are several things that one can do during spare time.
Use the income gained from a side hustle to repay your debt fast. Over time, your passion can also be you full time vocation.
7. Extra repayment
Paying an extra EMI frequently would lower the interest impact tremendously. It will also shorten the repayment tenure. Once the repayment tenure is shortened, the interest burden automatically comes down. This is usually a substantial chunk over a period of time. Keep an excel sheet handy, which can help you keep track of the savings made.
8. Balance transfer
If your credit score is good, you can easily negotiate a balance transfer at an attractive rate. Try to approach at least 6-7 banks and select the most attractive rate. Don’t forget to read the other finer terms and conditions to decide further. Check pre-closure clause. Any lock in period will restrict you.
9. Sell extra stuff
You may have extra stuff at home or something you no longer need. It is better to sell that off and use the money to repay the debt. These can be an old sofa that you no longer need or a two-wheeler. There is no point in cluttering your place, and doing away with unwanted stuff will also provide peace of mind.
10. Change jobs or get a raise
In-order to raise your income, you can explore new jobs. You can also ask for a raise in your current occupation. Start making yourself valuable in the current job by upgrading your skills, demonstrating commitment and discipline.
11. Bonus tip
This is for those who were able to read this further. Consider having auto sweep facility in your bank account. You can set a limit. Anything over and above is a fixed deposit and you earn extra income on it. It is easy to set up. Check with your bank if you have the facility or ask for it.
12. Wrapping up
A little discipline can help you achieve the desired result faster. The key is to remain consistent over time. Don’t aim for a big step rather go for small consistent steps. They will build a solid foundation towards achieving your financial dreams. Use common sense and avoid expenses that are just for the sake of feeling good or showing off. If it really helps you, then go for it. For example Educational expense if far better than buying a burger. Go buy a book and read it. It could be the best investment. Learn a trade and hone your hobby. Use credit cards and other bank facilities wisely as they will help you build a good credit score. Educate your family on these small steps and they will thank you later. Show them how it is done and they will most probably never get into a debt trap.