Are you in debt? Unfortunately, many Americans are in the same boat. With rising college cost, it is rare to meet an adult that doesn’t have expensive student loans.
Not to mention, many Americans also have car loans, house loans, and credit card bills. Your debt can leave you feeling like a boxer being hit over and over.
However, your life doesn’t have to feel like a punching bag. You too, like many others, can get rid of debt completely and learn to live a debt-free life. It may take some sacrifices, but it is possible.
The most important aspect of paying off debt is to make a plan and never give up.
There are simple solutions to your debt story and by taking some easy steps you can learn to move forward.
What this post will cover:
- how to get rid of debt completely
- how to side hustle
- ideas to help you take steps to become debt-free
7 Steps to Get Rid of Debt for Good
#1 Pay off small bills
You May have heard of Dave Ramsey, a popular money guru. He suggests using the Debt snowball to help pay down debt.
Essentially, what you are doing is paying off your small debt first. Once you pay off your smallest debt you will feel a sense of accomplishment and continue to pay off your other debts.
For example, if you have a credit card bill at $1000 and a student loan debt at $8000, you will pay off the $1000 bill first.
Don’t forget, you must make sure you are paying more than the minimum.
You can also choose to pay your bills with the highest interest rate first. It may take longer to pay off your first debt, and that is okay because you are paying less interest.
Pick the debt plan you are most comfortable using and make a plan including how much you are going to pay.
#2 Get a side hustle
If you are in debt, one idea to help you pay down your debt is to buckle down and get a side hustle. Use the extra money to pay off debt and once you are done, use your money to start an emergency fund.
Although working extra hours after your regular job may sound daunting, know this is not a life sentence. Once you have paid down most of your debt, you can cut back.
Yet, if you are loving having extra money, you may want to continue until you can build up an emergency fund. In this way, you are preventing future debt.
If you are lost for ideas on what to do for extra money, check out this post which includes 75 side hustle ideas to get you started. If you are a stay-at-home mom, there are more side hustles you can do from home to help supplement your household income: 21 Jobs That are Perfect for a Stay-at-Home Mom.
Looking for a place to grow your extra money? Check out the rates at CIT’s high-yield savings account.
#3 Spending freeze
What is a spending freeze?
This means you stop spending money for a certain amount of time stock up and pay bills early. Then take the first two weeks of the month as no spend weeks.
Although you still pay bills and stock up before, this challenge will help you save money. Find free activities for your family to do during this time. This is something small you can do every month to help you save money.
Although you are stocking up before, if you know you are not allowed to spend any money for that week or two weeks, you will be surprised at how much you can save just by avoiding trips to the store and restaurants.
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#4 Make a plan to take control of your money
Studies show that you are more likely to succeed by simply writing down a plan. So don’t just say you are going to get out of debt. Make a plan and start taking the necessary steps.
Make sure you have a budget in place. For more help on creating a simple budget, check out this post: Easy Budget
Debt #1: Credit Card Bill – Owe $2000 – Minimum $50 – Pay Monthly: $150 (base this on what you can afford, but pay more than the minimum or you will never pay off your debt)
Debt #2: Second Credit Card Bill – Owe $4000 – Minimum $80 – Pay Monthly $100 (pay this until Debt #1 is paid off and then add the $150 to this payment amount)
Debt #3: Student Loan – Owe $15,000 – Minimum $200 – Pay Monthly: $225 (pay this until Debt #2 is paid off and then add the $150 and $100 amounts you were paying to your this debt payment)
You will feel so much better when your plan is in place and you are taking action to pay off your debt. Your debt does not have to consume your life and it is possible to get rid of debt completely.
If you feel you do not have money to pay your bills, check the tips in this post for ideas:
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#5 Continue paying off debt until you are debt-free
After you pay off your first debt, don’t stop. Continue on to your next debt and use the extra money you were paying on the now paid-off debt, to add to that bill.
Made popular by Dave Ramsey, “The Debt Snowball” method of paying down debt can help you pay off debts by making small steps and paying off your smallest debt first. It works because you are less overwhelmed by your debt. You see results and are motivated to continue debt payoff.
Arguably, you may want to look at debt with higher interest rates because if you are using the debt snowball method, you are essentially paying more in interest. Yet, attacking your bigger debts first may leave you feeling overwhelmed and more likely to give up which would leave you paying more money in interest anyway.
My best advice is to find the best method that works for you and stick with it.
If you are looking to get your financial life in order to try personal capital for free. This program will help you manage your finances all in one place.
Although this free tool is focused on investing, it also helps manage your cash flow and shows how much you have coming in and going out, which is SO important when putting a budget in place. I love that it has an app and can be accessed right from your phone. You can also set spending and savings targets and link to your bank and cards. Try personal capital for free.
Another helpful tool is a service called Trim. This is also free and will help you find ways to save money by negotiating your cable, t.v., and internet bill. Trim also has a “debt payoff” feature to help negotiate interest rates. Click here to try Trim for free.
#6 Check your credit
It is important to check your credit. As you pay off debt, your credit number will start to rise. This is important because your credit score can help you score better deals in the future. Some companies check your credit before you sign up for cable or Internet. A good credit score can lead you to better interest rates, especially if you are planning on buying a car or house after you wipe out your debt.
Credit Sesame is a great way to check your credit and start repairing it.
Understanding Credit for Beginners
#7 Pay cash to get rid of debt completely
Once you have paid off your debt, learn to use cash and avoid future debt. It is possible to save for larger purchases too.
If you paid off $10,000 worth of debt, you could save the money you were using to pay down this debt for a car or a down payment.
Learn to live frugally and save for purchases. Not only will you have extra money, but you will also avoid costly interest from loans and credit cards.
Consider using the cash envelope system. With this system, you will allow a certain amount of money for monthly expenses in a labeled envelope. Don’t forget to budget in the fun and label an envelope “entertainment.”
Cut out the little spending habits that are killing your budget and you will find extra money to do the things you want in life. Invest your money and watch it grow.
How to Completely get Out of Debt
In Summary, getting out of debt is important. You can live your dream life. You will have less stress and extra money to do the things you love in life.
Try to make a plan and stick to it. Start small and pay your smallest debt first and continue with larger debts, adding to the payment each time.
Use your side hustle money to help you and start an emergency fund to avoid future debt. Your best financial life is within reach!
What is your biggest struggle with paying down debt? Or have you got out of debt completely? Leave me a comment. I would love to hear from you.
Related Personal Finance Posts:
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