After all the bills are paid and necessities purchased, it can be hard to find extra money for anything else. But paying down debt is an essential part of achieving financial freedom. Best of all, it’s absolutely doable with the right plan. Here are 10 quick tips to help you pay down your debt.
1. Make a budget
Look at your past expenses and separate your spending into categories. You can get as fancy as you want, but a good budget boils down to a few simple things. Know how much money is coming in and keep track of what’s going out. Check your budget often, make sure each category (including debt reduction) has enough money to meet your needs, and adjust spending as you go.
2. Use the Snowball Method
List all your debts and their minimum payments on a sheet of paper. Organize them from smallest to largest. Start making payments (as much as you can) on your smallest debt first. When that debt is completely paid off, “snowball” that money into paying off the next smallest debt.
3. Pay more than minimum
Pay as much as you can toward credit card balances and other loans. As long as there is no penalty for paying early, you have every reason to pay off your debt as soon as possible. You’ll shorten the length of time you have to pay debt and incur less interest in the long run.
4. Make sacrifices
Find your financial Achilles’ heel and work to eliminate unnecessary spending. If you go out to eat for lunch every day, try packing a lunch at home and use that extra cash to pay down your debt instead.
5. Don’t get into new debt
As you work to pay off your loans, avoid the temptation to open new loans and incur new debt. Replacing old debt with new debt won’t get you very far in your quest for more financial freedom.
6. Use extra money
Allocate extra money like work bonuses or unexpected cash windfalls toward paying off your debt. It can be tempting to spend this money on luxury or non-necessity items, but debt reduction will pay off in the long run.
7. Forgo your vacation plans
Paying off debt requires sacrifice. Any extra money that you don’t absolutely need can help your debt reduction efforts, and save you money in the long run. If you normally plan a yearly vacation, consider finding less expensive ways to relax and use the money to pay down debt.
8. Avoid shopping trips
Making regular shopping trips to the grocery store is probably unavoidable. But extra trips to the mall, do-it-yourself stores, and big box stores can be trouble. You intend to buy something simple, and before you know it you’ve spent too much. Window shopping can be expensive.
9. Cancel automatic purchases
Take inventory of all your automatic purchases and subscriptions. If you don’t absolutely need or rarely use these items or services, consider cancelling them and removing your credit card information from online stores and websites.
10. Don’t fall into old habits
Once you’ve set good debt reduction habits and paid off debt, don’t fall into old habits. Be smart about your spending and stick to your budget. The freedom of being debt free is worth the work in the long run.
Use a combination of the best debt elimination ideas that work best for you, and start paying down your debt to gain more financial freedom.