Taking control of your financial life and boosting your wealth means getting rid of any debt you have as fast as possible. However, this can be easier said than done if you’re dealing with a hefty student loan, mortgage, and credit card bills. Fortunately, there are many powerful strategies you can use for reducing your debt fast.
It’s best to take a two-pronged approach when it comes to clearing your debts. That means that you should be spending less and making more money so you can use as much as possible on reducing your debt. However, you’ll come out of the process with no debt, more disposable income, and more financial freedom.
1. Take On Your Smallest Debt First
Instead of paying nothing but the minimum payments on your debts each month, you should aim to pay a little extra to start getting rid of them. However, paying extra on all your debts isn’t the most practical approach. Instead, you should focus on clearing your smallest debt as soon as possible before moving onto bigger ones.
This strategy is often referred to as the snowball method. By using your extra savings to pay extra on your lowest debt each month, you can clear it quickly then start taking on the next smallest debt. When you use this approach, you’ll end up with fewer payments to deal with and feel much more optimistic about eliminating your debt.
Another good strategy you might want to try is the avalanche method. This is similar to the snowball method but entails clearing the debt with the highest interest rate first. This is useful as you’ll eventually pay less in rising interest costs. However, it can also take longer if you’re dealing with bigger debts.
2. Cut Down On Spending To Save Money
If you’re trying to clear your debt, it only makes sense that you should start saving everything that you can. Not only should you put more of your paycheck in a savings account to use against your debts, but you should also try eliminating as many unnecessary purchases from your daily life as possible.
This might involve cutting down on expensive lunches, coffees, takeout food, and luxury purchases like clothes and gadgets. You don’t need to eliminate these things from your life forever. Just make smart choices with your money for a few months so you can put yourself in a better financial situation.
It can also help to find cheaper ways around your essential expenses. For example, you can cut your energy bills by adding a few energy-efficient touches to your home. You can also use comparison sites to find cheaper deals on all of your utility bills. You might even want to start buying ingredients like rice, pasta, and frozen meat in bulk to cut down on your weekly grocery costs.
3. Make Extra Money On The Side
Saving money to pay off your debts will help. But if you want to clear them even faster and have more disposable income to enjoy yourself, you should consider taking on a side hustle to make extra money in your spare time. You don’t need to work two jobs, sometimes all it takes is a few hours a week to make a good chunk of pocket money.
Many people nowadays make money online. You could become a virtual assistant, sell things on eBay and Etsy, or even start offering freelance services in web design, copywriting, programming, marketing, or IT. With enough effort, you can make enough income to cover your monthly bills and even a little extra to spend on luxury purchases.
If you don’t have much free time, you can also consider sources of passive income. For instance, if you have a spare room in your house, you could rent it out with Airbnb. You can also rent out your car when you’re not using it with sites like Turo. Sites like Neighbor even allow you to rent out space in your garden shed or garage for storage purposes.
4. Consolidate Your Debts
Handling your debt can be highly stressful if you have multiple payments to make. If you don’t have enough money or forget to pay one, you could end up with even more costs to cover. If you’re overwhelmed by multiple debt payments, you might want to consolidate them into one payment.
Many services offer consolidation loans that allow you to cover all your monthly debts and make one easily manageable monthly payment instead of multiple. Although you might end up paying more in interest, this strategy will give you more time to pay everything off, making it easier to handle.
This isn’t always the best approach to take. For instance, if you don’t have much debt then paying off your smallest debts one at a time will likely save you more money in the long run. However, debt consolidation is often more convenient and practical when you’re struggling with multiple payments.
5. Don’t Borrow Money You Don’t Need To
While it should go without saying, you shouldn’t borrow any more money if you’re already dealing with multiple sources of debt. Avoid new credit card deals and don’t try to finance anything you buy in a retail store as this will only end up with you having more payments to deal with.
Borrowing money is important for some situations, such as buying a home. However, in many cases, borrowing money leads to more payments to deal with and extra costs due to added interest. Instead, you should learn to save your money so you can cover all of your necessary costs.
You might even want to start an emergency fund in a high-interest savings account. An emergency fund is particularly helpful when it comes to covering unexpected costs like repairs and medical bills and can prevent you from having to take out a predatory cash loan or unnecessary bank loan.
These five powerful strategies can help anyone start taking on their debts. By spending less, saving more, and boosting your income, you’ll soon end up taking down your debt payments one by one and, before long, you’ll have enough financial freedom to enjoy yourself a lot more. Start using these tips today and you’ll have control over your finances before you know it.