Right now, it might feel like you’ll never be able to dig yourself out of the hole debt has created, but everyone no matter how deep in debt they are can turn things around in the future.
In fact, many of you reading this right now will be able to free yourselves from the burden of debt in less than 12 months, some of you could even be out of debt by the end of this year, you just have to knuckle down and do what needs to be done.
Here are some simple tips you can use to free yourself from debt in a matter of months.
1. Know Your Debts
Get all your debts out in front and face them head-on. You cannot dig yourself out of debt if you don’t know what you’re dealing with.
Write down how much you owe, where you owe, interest rates, fees, how long you have to pay it off and the regular payments. Looking at all of it you will be able to make a proper plan to clear it fast.
2. Rework The Debt
Now you know what debt you have, consider if it is possible to change any of it e.g. balance transfers or consolidation.
If credit card debt is your main issue, one thing you could do is look for a credit card company that’s offering a 0% transfer deal and transfer your debt. You will need to close the old card so you can’t continue to use it but it can help you reduce your debt faster since no more payments will have interest.
Be aware, balance transfers do impact your credit score and go on your credit history.
Another option is debt consolidation loans so you have one payment instead of multiple. Studies show people who use debt consolidation loans do not change their habits though. Unless it really is your only option, avoid it.
Call your providers and ask them to lower the interest rate or see if there are other options that can save you money. Sometimes a simple call can save you thousands of dollars.
With some debts, if you have a lump sum, you might be able to negotiate paying the loan in full or getting the amount reduced as well.
The worst that can happen is they say no and you have to keep going with clearing the debt you accrued. So it is worth a shot asking if you can get it reduced or a lower rate.
4. Debt Snowball or Debt Avalanche
Two methods for paying off debt that are commonly discussed are the debt snowball and the debt avalanche. The debt snowball method has you pay off the smallest debt first. Once it is clear, you add the payments from that and anything extra you were paying into it to the next smallest debt and so on until all the debt is cleared.
Debt avalanche has you paying off the debt with the highest interest first instead. This method saves more money when you stick to it. Paying off interest free debt because it is a smaller debt while your large debt has higher interest isn’t a smart move financially.
The reason most do the debt snowball instead of the debt avalanche is because of the psychological boost they get from clearing the small debt. But you pay more in interest.
Paying off the higher interest loan first will save you paying so much in interest.
5. Pay More
Obviously, if you’re struggling to pay the bills and feed your family, the last thing you want to do is bump up the amount of money you pay off your debts every month.
However, if you have money to space once all your needs are taken care of, instead of spending it on frivolous stuff you don’t really need, divert as much as possible to your debts.
If you’re only paying off the minimum every month, your debt will continue to rise and you’ll struggle to really get it under control, but if you pay 2,3 or even 5 times the minimum, you’ll get a handle on it pretty quickly, and you’ll be debt free before you know it.
6. Earn More and Put it on Debt
Our income only stretches so far. At some point, you might need to make more money in the short term to clear the debt. Looking at your debts, if you could make an extra $100, $200 or even $500 a week, how much faster could you clear your debt?
Check out 5 ways to make an extra $500 per week.
7. Curb Your Spending
Obviously, if you’re serious about being debt free in a year’s time, then you’ll need to curb your spending for a while, at least. Don’t buy anything that isn’t essential for the next 6-12 months and you’ll soon be debt free.
It can be tough but as it is for a limited time and your end goal will give you so much freedom, it is worth it.
Go over all your expenses, see where you can cut back, and start doing it now. Negotiate with all your debts, and compare providers for insurance, electricity bills, and any other bills you have. Stop having takeaway and stop all the other spending except for essentials.
It is amazing how much money we waste without even realizing it. Once your finances are back on track, you can loosen the purse strings a little, but be careful not to get back into debt.
8. Get Rid of Old Debt
Did you know that some really old debts can be completely quashed? The statute of limitations on debts that are 7-10 years old or more can be eliminated in many states if you simply do not have the money to pay for them.
All you have to do is talk to a professional debt management company or the consumer protection agency, who will be able to talk you through the process.