6 WAYS TO PAY OFF YOUR DEBTS QUICKLY

Throughout our lives, many of us will find ourselves facing debt–whether it’s credit cards we’ve used irresponsibly, car payments we can’t keep up with, a mortgage, or that personal loan from grandma that we promised we’d pay back by a year ago…debt is no fun, and like most unpleasant things we often ignore our debts.  Unfortunately, this doesn’t make them disappear. In fact, the opposite usually happens – the more we ignore our debts, the bigger they grow.

For some, debt can become so overwhelming that it feels hopeless or that you will never be able get rid of it. The first thing you must do is shift your mindset and allow your actions to follow.  This means you must believe that having a debt-free life is attainable and realistic – then before you know it, you will be free of the financial shackles.

So, how can you manage your debts and pay them off quickly? Here are 6 tips:

Create a Spending Plan.

When working on debt reduction, creating a spending plan (or budget) is a crucial first step.  Mapping out your income and expenses will help you figure out where there is room to increase payments on any debts you have. Don’t think of this as a budget that restricts you from enjoying life. Think of it this way: “how do I plan to spend my money so that I am living my best life – free of debt?”

Pay more than the minimum payment option.

For debts such as credit cards and loans, most lenders will allow you to set up payment plans with a minimum amount.  For example, a credit card with a $5,000 limit, could allow you to pay as little as $25 per month. However, you should always work to pay more than the minimum allowable amount as this will help to eliminate your debt at a faster rate. You will often find that with such payments as student loans, your minimum payment is only going towards interest, with your principal balance not being reduced.

Be realistic about what’s feasible for you; make sacrifices, but don’t kill your spirit.

When setting spending plans, particularly with the goal to pay off outstanding debts, it can be easy to get frustrated and lose your motivation to stick to your spending plan.  As you work to reduce your debt–BE REALISTIC about what will work for your lifestyle. Do not look at making sacrifices as a bad thing, or something that means you have to spend the year being miserable until you reduce or eliminate your debt. Debt reduction is not nearly as fun as racking it up, but a simple mindset shift about the benefits of small sacrifices can go a long way to ensuring your success.

Use the approach that works for you – Pay off small debts or those with higher interest rates first.

It is important to note here, that there’s no cookie-cutter approach to reducing debt. Different approaches work for different people so when given an option, choose the approach that will keep you motivated. If you’re faced with having to choose between paying the debt with a lower balance and lower interest rate or the debt with the higher balance and higher interest rate – ask yourself ‘which one would make me feel more accomplished?’ It’s perfectly fine to chip at the one with the higher interest rate because a dollar towards that balance saves you more than a dollar on the balance with a lower interest rate. In fact, this is the approach most financial experts would recommend. However, for some people tackling the small balance first leads to a feeling of accomplishment and clears the way for you to do more in the long run. Ultimately, do what works for you so that you can stick to your overall debt reduction plan.

Consider ways to earn extra income.

Getting a part-time job or elevating your current side hustle is a quick way to make extra cash, but it’s not always the easiest. With the prevalence of the internet however, it is becoming more and more easy to work on a more passive form of income.  Whether you’re crafty and can sell your items on shops like Etsy, or you’re good at proofreading or accounting, you can pick up small jobs to help those around you and use the extra cash toward your debt.

Stop Creating New Debt.

When working to reduce your debt–DO NOT CREATE MORE! This may sound simple, but it’s not always.  If you’re paying off credit card debt, do not open the department store card just because the deal sounds good. Do not miss payments, even if you can only afford to pay the minimum that month.  These actions are counterintuitive to debt reduction/elimination and will only serve to lead you off the path to success.

These are just some ways you can reduce debt quickly. I dare you to shift your mindset and consider these 6 steps in order to finally achieve a debt-free lifestyle.

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Written by Desnoyers CPA

Desnoyers CPA

Known for her friendly, outgoing nature and her rare talent for financial foresight, Lydia Desnoyers has been serving individuals and small businesses in Florida since 2010. After earning her Master’s Degree in Accounting from Nova Southeastern University and her Bachelor’s Degree in Accounting from Florida State University, she became a Certified Public Accountant and a Certified Fraud Examiner.