Getting out of debt isn’t easy. Sometimes it takes all you have to keep up with monthly bills and save for a rainy day, let alone pay the minimum monthly payments on your credit card. Fortunately, there are plenty of ways to get out of debt that won’t make you miserable. Here are some of the best strategies to become debt free in the new year.
Strategies to get out of debt
If you’re ready to get out of debt, start with the following steps.
1. Pay more than the minimum payment
Go through your budget and decide how much extra you can put toward your debt. Paying more than the minimum will save you money on interest and help you get out of debt faster.
2. Create a realistic budget
When your expenses and income don’t match, you may find yourself with debt you didn’t plan for. That’s why creating a realistic budget that is flexible enough to accommodate any changes in your personal finances will be the best way to avoid going further into debt.
3. Focus on paying high interest rates first
It might make more sense when you are in debt to focus on low balance debts rather than those with higher interest rates, but when it comes down to it, paying off the highest rate debts should be your top priority because if you can get them out of the way faster, this will help reduce the amount of money you owe overall as well as how much money you have available to spend.
4. Refinance debt
Refinancing debt to a lower interest rate can save you hundreds in interest and help you repay debt faster. You can refinance mortgages, auto loans, personal loans and student loans. It’s worth it to do an online search for refinance lenders in your area. You may be surprised by the results you find!
5. Make extra payments whenever possible & use tax refunds wisely
Even if you have a small amount of money left over from your bills after paying, consider throwing that little bit towards your debt instead of spending it on something else (unless the interest rate is higher with whatever else it might go toward). And don’t even think about using a tax refund or other savings towards another purchase or expense (food, vacations etc.) before paying down debt. This one can be hard to stick to when there are so many enticing things out there you may wish to spend money on but this will only end up costing you more.