Simply put prioritizing debt repayment over purchases or savings can help you get closer to debt zero. However, there is really no one size fits all answer to this question. It really depends on the types of debts you have, if you’re paid up or past due, your resources and more.
- Prioritize debt repayment. Make a conscious effort to cut expenses and focus your attention to paying off debt. Every decision made around money should be filtered around debt repayment. This means paying all of your minimum payments. Any extra funds should go to the highest interest rate debt until it’s completely paid off.
- Limit your spending. Spending money is a part of life but it can get out of hand. To get out of debt, you’ll need to cut expenses. Reduce the monthly payments on housing, utilities, transportation, subscription services, interest paid on credit card debt. Use the savings to pay towards debt.
- Make a commitment to stop borrowing money. The first step in digging out of debt is to stop adding to the debt load. This may require changes to your lifestyle especially if it is funded through credit. Put the credit card away and start saving money.
- Organize your debt. If you don’t know how much you owe or whom you owe, it’s difficult to create a plan to pay off debt. Organize and analyze your debt from credit cards, personal loans, home and car loans. Make a spreadsheet that includes information about all of your debts. The information should include balance, interest rate, due date, payment amount, etc.
- Make extra cash and pay towards debt. Supplement your income by selling items you don’t need, get a part-time job or perform side hustles. Use the extra income to make additional payments towards debt which reduces the amount of interest paid.
- Consolidate unsecured debt. It may be difficult to make payments to multiple creditors and consolidation could help you save thousands of dollars on financing charges and make repayment easier.
The only way to get out of debt is to pay as much as you can on existing debt and ensuring no additional debt is added.
Determine if debt consolidation, settlement or a management plan is an option. If you can’t manage debt on your own, you may want to look into a form of debt management. There are tons of non-profit companies that can help.
For do-it-yourself types, use the debt avalanche or debt snowball methods to quickly pay off your credit card debt. For student loans, learn about student loan refinancing options, forgiveness, discharge and cancellation programs available to public service employees (government, non-profits, teachers, military service).