Debt is no stranger to most people. In fact, almost 82% of millennials are in debt. However, debt
isn't just for the younger generations either. More than 80% of baby boomers are also in debt.
While it’s somewhat comforting to know that you aren’t the only one facing debt, don’t let this
keep you from taking the steps needed to begin digging yourself out of the financial hole.
Keep reading to learn 5 effective steps in paying off debt. In just a few short months, you’ll find
that you’ve made significant progress in paying down your loans and credit cards
1. Prioritize Your Debt
Chances are you have a variety of debt. Most people have student loans and credit cards along
with a mortgage and a car payment. In order to pay off your debt effectively, it’s important to
have a plan of attack. Start by prioritizing your debt.
There’s no wrong or right way to prioritize debt, but there are two preferred options. The first
method is to pay off highest interest rate debt first. This typically includes credit card payments
and personal loans. By paying off this debt first, less of your money will go towards interest over
the life of the loan.
The second option to prioritize debt is to pay off the smallest debt amount first. If you have a
credit card with a $1,200 balance, you can likely pay it off in a just a few payments. This is a
quick way to have more money to put towards higher debt amounts.
After prioritizing your debt, you can also use tools like a debt payoff planner to help you to
manage when payments on due along with a projected schedule of when a certain loan or credit
card will be paid off. By using a debt payoff planner, you’ll have visual goals to work towards,
making it much easier to stick to your payoff plan.
2. Always Pay on Time
Another critical tip to effective pay off debt is to always pay more than the minimum. Paying just
the minimum amount due won’t get you anywhere if you’re serious about tackling your debt and
wiping it out for good. While you may not be able to afford to pay double the amount due on all
of your debt, even the smallest amount can have a big impact on your debt amounts.
Before determining how much to pay towards each debt, it’s helpful to sit down and make a
budget. Write out all of your monthly sources of income along with bills and debt payments.
With the money you have left over, you’ll want most of it to go towards the highest priority debt.
From there you can put extra money towards other debt payments.
4. Minimize Spending
To ensure you can pay more than the minimum amount due, it’s important to find ways to
minimize spending so that you’re able to put more money towards your debt and less towards
day-to-day costs. Some effective ways to minimize spending include:
money left over each month to put towards your debt. Once you have a good handle on your
spending habits, you may even find that you have money available to put into a savings account
or towards an emergency fund.
5. Increase Your Income
Another effective way to pay off your debt quickly is to fund ways to increase your monthly
income. Do you have items in your home that you no longer use? You could hold a yard sale or
sell them on eBay to make cash while also freeing up space in your home!
Do you like to write and know a little bit about marketing? You could apply to become a content
creator or social media marketer for clients.
The key here is to find an activity that doesn’t take up too much time but also allows you to
make a little bit of money. By increasing your cash flow each month, you’ll have more funds to
put towards debt payments.
Paying off debt without a plan of attack isn’t likely to succeed. Use these 5 steps to effective pay
off your debt and to start enjoying financial security and freedom.