The best way to get out of debt is to have a plan and to stick to it. The plan needs to be sound, as in, it accounts for emergencies and the unexpected. If the plan is too strict and the numbers are too close, you are bound to get discouraged. You have to be making a profit when you pay off your debt.
Here are seven ways you can get yourself out of debt in 2020.
1. Make a list of your debts and your current income
Before you can even begin to start paying off any debt, you have to have a clear and honest picture of how much debt you are in and how much much you are making. To get a clear picture, you need to gather the following:
- all of your statements: credit cards and loans and student loans
- credit reports for a record of all debts
- credit score
Remember to include any family, medical, or recurring bills like utilities.
2. Create a budget plan
Once you have a record of all of your debts, you need to make a detailed chart about each debt. You need to list the following on your chart:
- creditor’s name
- minimum monthly payment
- interest rate
Now you need to come up with a time frame. This might take some trial and error. You need to see how much you need to pay in order to zero out your debt in this time frame.
3. Increase your income
Once you have everything figured out, you need to start making more money. You can do this several ways. You can get a second job, switch to a job that earns you more money, or pick up side gigs to help make ends meet. You might babysit, walk the neighborhood dogs, pick up paid surveys, or become a freelance writer.
4. Cut expenses
Nothing will help you so much as cutting back on your expenses. You need to figure out where most of your money goes. Is it to food, gas, repairing things around the house, the kids? If you are unable to make more money by getting a new job, you can often times make up for this by cutting back on how you are spending money.
Maybe you can bike to the store and throw your groceries in a basket. You can buy your groceries in bulk, or even plant some of your own seeds and grow your own vegetables. Try eating out less during the week. Shop the sales, and pass on that dress or essential oil that you really want.
5. Pay off your most expensive debts first
If you have multiple debts, it is a good idea to focus on one at a time. You should focus on your most expensive debt and pay that off completely, rather than paying just the minimum. Once you pay off that debt, you can focus on your next largest debt, all the way down to the smallest debt. Seeing the progress you make will do wonders for your motivation as well.
6. Get a loan with a lower interest rate
Personal loans typically have lower interest rates than credit card loans. Better yet, if you have a home, see if you can tap into the home equity line, which has even lower interest rates. If you are paying off a car, see if you can refinance. There are plenty of good money management resources to look through at Rate Rush.
7. Know your values
You will struggle and want to give up. Therefore, you must create a positive environment and constantly remind yourself that you can do it. Focus on your goals, frame them positively, and stay true to your values. Start small, gain momentum, and remember that there will be times when you will struggle.
It is entirely possible to pay off all of your debts. While it may seem like a daunting task, you just have to get clear on where you stand, come up with a plan, stay focused, make more than you spend, and stay true to your values.