Debts often start small—a few hundred dollars borrowed from a friend to cover your groceries while waiting for your paycheck, $50 charged to your credit card for this moisturizer you simply have to have. Then, next thing you know, you have thousands of dollars on credit card debt, and other lenders are breathing down your neck.
Unfortunately, between paying off your credit cards and student loans, as well as refinancing your mortgage, you’d be hard-pressed to live a life debt-free. According to Debt.org, a typical American household carries an average of $137, 063 in debt. But while it might always be a part of your life in some way, it doesn’t mean that your debts have to be this all-consuming thing dragging you down in life.
With enough discipline, though, you can take your debts down to a more manageable level. Below are a few ways to start:
1. Know how much you owe
If you want to tackle your debt effectively, it’s good to start with a clear picture of how much you owe. You can create a simple list of all your debt or be more elaborate by creating a spreadsheet. Indicate the monthly payments you’re making, when the debt is due, and the interest rate each one accrues. With the numbers in front of you, you can become more conscious of your obligations, helping you stay on track of repaying them.
2. Choose a suitable method of paying debts
You have to be strategic when it comes to eliminating your debt, especially if it’s on multiple accounts. These are some of the most effective ways of tackling your debt:
- The avalanche method, which means prioritizing the debt with the highest interest rate and working through them until you only have the lowest-interest debt left. This prevents you from paying more on interest.
- The snowball method, which means prioritizing your debt starting from the smallest balance to the largest, no matter their interest rate. This gives you small victories, which can get you motivated to continue settling each debt until you only have the biggest one to contend with.
3. Pay more than the minimum
If you can, pay more than the minimum of your monthly balance, at least for the debt you’re prioritizing. Say you’ve opted to adopt the avalanche method. While you pay off the rest of your debt in the minimum required monthly payment, set aside a little more for the priority debt. It can be as small as an additional $50 or as big as doubling your monthly payment, but both make a positive difference in eliminating your debt faster.
4. Pay your bills on time
Late fees generally aren’t too big, which is what makes it tempting to say that it’s okay to delay your payment. But taken together, you’ll realize that late fees will cost you from hundreds to thousands of dollars, depending on how many times you missed your deadline or how long your debt payment schedule is. Avoid paying more than what you already owe by making sure you follow your bills’ due dates.
Conquering what seems like an insurmountable debt requires determination and strategy. Find these traits in you and follow the techniques above so you can be free from the clutch of your debts as soon as possible.