Being buried under a mountain of debt is not ideal for anyone and it can seem incredibly overwhelming to think about becoming debt-free. Learning how to pay off debt fast isn’t for the faint of heart and it will take some hard work and a few sacrifices on your part. It is important not to get discouraged and to know that it can be done quickly if you try! If bankruptcy is perhaps your only option, then you may want to consider contacting a bankruptcy attorney in Gilbert to guide you through the process.
Here are some top tips.
Table of Contents
Know what you owe
If you’re unsure how much debt you have, you will never be able to confidently say you’ve paid it all off. That being said, the first step is to get one big number. This number will be your long-term, lump sum pay off goal. Whether this is before or after speaking to your creditors is up to you.
You can get a free copy of your credit report from many different credit report agencies to help you with this first step. It might be worth requesting from all of them to have a clear idea of what actual debt you have.
Set a debt-free goal date
So many people make the mistake of not setting a date that they would like to be debt-free by. For those who do, this date serves as motivation and makes us more inclined to pay it off.
Before you begin, look at how much debt you have total. If you owe £10,000, set a goal of paying off £100 or £1000 first. Of course you will want to pay the entire £10,000 off as quickly as possible, because interest rates are terrible but a high goal can be extremely overwhelming.
By breaking your goals down into more manageable steps, you can utilise the “snowball” effect that is so popular when paying off debt. If £1,000 is still too much to reach for, then you should start with aiming to pay off £100 or something similar first. Any amount is fine. Don’t compare yourself to others as the only person you’re competing with here is yourself!
Setting a debt-free goal date will obviously have to include basic budgeting. Do you know how much you can truly afford to put towards your debts each month?
Once you have set your mini goal, set a goal date. If your goal is £100 and you know you have an extra £25 a week you can save, set your goal date for 4 weeks time. You want your goal date to be realistic but also to push you. Without deadlines, there’s way too much room to give up.
Reduce all possible expenses
To prepare you for your journey to becoming debt-free, you should reduce as many of your expenses as possible. This is really important if you don’t have much excess income to redirect towards your debt each month. This is where sacrifices and strict budgeting come into play.
Avoid your daily Starbucks trip, try to reduce how often you spend out on McDonalds and Dominos and call to see if your bills for things like the internet, cable, car insurance, etc. can be lowered.
This phase – especially cutting out extra shopping and fast food – will be difficult at first but the longer you stick with aiming to pay off debt, the easier it gets.
Reach out to creditors
It is not common knowledge but some creditors will actually negotiate your total amount of debt with you. Use this secret to your advantage! These negotiations can often result in you owing much less than you started with, all by reaching out to them.
The only way to see if a creditor is willing to negotiate is to contact them. However, keep in mind that reaching out to them will give them your phone number – you might want to use a number you don’t use to avoid them contacting you constantly.
Use the Snowball Method
The Snowball Method of repaying debt was popularized by financial guru Dave Ramsey and, even if you’re not a fan of his personally, this method is still one of the best ways to pay off debt.
How does the process work? You begin paying off debt by paying the smallest debt owed with the smallest monthly payment. Then once that debt is fully paid, you then move onto the next smallest, making sure to roll the previous monthly payment into the new one. Over time, you will be paying off debts with high monthly payments and not suffering too much because of it, due to the rolling over of previous payments which you are no longer paying.
Pay every spare penny
When you’re trying to pay off debt fast, you must not be stingy with the money you are paying towards it. Every penny of extra money you have should go toward your debt repayment campaign until you are totally debt-free. If you’re not throwing extra money at it, it will take far longer than you really want to pay your debt all the way down.
One sneaky, painless way to use every penny is to set your bank to round up all of your purchases to the next dollar. This means if you purchase groceries and the total was £103.45, you will have 55p rounded up and put into another savings account. Then, you can use the funds from that account to pay extra on your debts.
Don’t forget that you can also pick up a side hustle to help bring in extra cash. The extra effort may be worth it if you’re really trying to become debt-free as fast as you possibly can.
Track your progress
Keeping a debt payment tracker on hand can be a very big motivator for when you get burned out and tired of the work involved. It can really help you keep pushing to pay off debt even when you feel like giving up.
Your tracker can be as simple as you want. There are many designs out there or you could design one of your own. Make sure you keep it in a place that you’ll see it often to keep that motivation rolling. Remember that every payment you make is one step closer to being completely debt-free!
Understand the journey
You will certainly get discouraged at least once whilst you are working toward paying off your debt. Sometimes it can be so tempting to just throw in the towel.
It can be tedious, time consuming and at times even heart-breaking. You will find yourself jealous of friends who seem to be enjoying life more than you are. You may even find yourself wanting to quit but you simply need to remember and understand that it is one-hundred percent normal and you’ll get past it! It’s all part of the journey.
In the long run, you’ll be so glad that you pushed yourself to pay off debt in order to become debt-free.
If you liked this, you might like 8 ways to make extra money at home.
Frugality Can Equal Happiness - Frugal and Fun
at[…] frugal person often sees each step towards being debt-free or early retirement as a great success. They don’t focus on that outfit they didn’t buy […]