How to Clear Debt Quickly
Debt is borrowing from tomorrow to pay for today. Once you are in debt, it can be a struggle to get out of it, especially since society has made it seem normal. If you can commit to a plan you might be surprised how quickly you can get out of debt.
Here are 5 things you can do to clear debt fast.
1. Get Real About Your Debt
Sit down with all your finances and get real about your debt. Write down how much money you owe, who you owe, when it’s due and the interest rates. Seeing it all in black and white will enable you to make a plan to pay it off.
2. Make A Plan
Debt snowball and debt avalanche are the two most commonly talked about plans for clearing debt. A debt snowball is where you start with the smallest debt, whereas a debt avalanche is where you work from the debt with the highest interest rate.
List your debts in order of smallest to largest for a debt snowball or from highest interest rate to lowest for a debt avalanche. This is your starting point.
Continue with the minimum payments on all debt while putting your focus on the starting debt. Any extra money you get goes to the first debt whether that is the smallest debt for debt snowball or highest interest if doing debt avalanche.
Once you have cleared the first debt, take the minimum payment from that debt plus all extra money you earn and place it on the second debt. Clear that debt and move to the third debt. Can you see how as you go along, the payments you are making on each debt get bigger enabling you to clear the debts faster as you go?
3. Make More Money
Find ways to make more money and throw that money at your debt. Sell off any items you can, rent out a room or rent out your garage, clean homes, do gardening for others, anything. It is up to you what you choose to do, how much time you want to spend doing it and how quickly you want to clear your debt.
Some people choose to spend an extra 10 hours a week doing things to clear their debt. Others take on an extra job and some people start a business. Decide what you want to do to make more money to clear your debt quickly.
4. Cut Back Your Expenses
I put making money first because there is a limit as to how much you can cut back. If you are in debt, you are living beyond your means so you need to stop. Look at where you can cut back such as cancelling subscriptions, comparing and switching providers, cooking more frugal meals, walking instead of driving etc.
Every small action adds up and once living below your means, you can add all those little savings to your debt as well.
5. Avoid Debt
If you are in the habit of using debt, you might be tempted to consolidate your debts and keep going. The issue with this is most people who do it simply end up in more debt. Instead of consolidating, simply pay off your debt. If you do consolidate, be sure to continue with the amount you used to pay instead of the lower repayments you will be offered with the consolidation.
Debt consolidation usually sees people in debt for longer because they reduce their repayments, freeing up money in their budget, or so they think. In reality, they have simply exchanged one debt for a longer debt.
Work on clearing your debt, avoid going into further debt and get control of your finances.