When you have a substantial amount of debt, it can be difficult to see a clear path to paying it off. But the longer you carry high interest debt, the more you’ll end up paying in the long run. This means you will have less money to save and invest in the things that matter most to you. If this sounds familiar, you’re not alone. Read on for six steps to take to get out of debt for good.
Create a Budget, and Stick to It
The first step toward paying off debt is figuring out how much money you have to do so. Write down all your monthly expenses, then subtract the amount from your take home pay. Whatever is left over should immediately begin going straight to your debt payments. In addition, cut out unnecessary expenses like a high grocery budget, cable TV or dry cleaning. Creating a budget will help you visualize your spending and saving as well.
Stop Using Your Credit Cards
While you should keep your credit accounts open, it’s critical that you stop using the actual cards. Piling more debt on top of the debt you already hold will make it impossible for you to ever pay off the balance. Be diligent in using cash, or pay for items with a debit card instead.
Pay Off Highest Interest Debts First
This technique is called “snowballing” your debt. Pay the minimums on all your credit cards and accounts except the one with the highest interest rate. Put all extra money toward that high cost debt until it is paid off, then roll that payment to the debt with the next highest interest rate until your debts are paid.
Get a Side Job
If you find that you can’t find any extra money in your budget to put toward debt, consider taking a second job. You can put everything you earn toward your debt, which will help pay them off much more quickly. Consider freelance writing, teaching classes, babysitting, cleaning houses, or anything else that can help you make some quick cash to put toward the money you owe.
Set Periodic Goals
Having thousands of dollars in debt can make it difficult to ever see the light at the end of the tunnel. And if that light is years away, staying motivated can be a challenge. The answer? Set small goals along the way. For example, aim to pay off a certain amount at the end of six months. The more you pay off, the more money you’ll have to put toward the rest of your debt.
Stay Positive
If you feel discouraged, think about all the things you’ll be able to do once your debt is paid off, and the relief you’ll feel when those payments are behind you for good. Know that as long as you are making even the smallest payments, you are in your way to a debt-free life.