Many of us face a difficult challenge in that we want to repay our debt, but we lack the resources to do it. In many cases, we only think we don’t have the ability to repay our debts because we live on a fixed budget with little room for leeway. Whether you realize it or not, there are ways to pay off your debts gradually over time.
Eliminate Unnecessary Expenses
If you do live on a fixed budget, you will have to find ways to improve your income versus spending ratio. You obviously can’t stop paying on your debts, so that means you will have to identify other ways to cut spending. It may help to start a journal in which you record every purchase you make, whether it’s for a morning latte or to pay on an online subscription service. Cutting these expenses may be easier than you think, if you look for cheaper alternatives. For instance, buy bulk instant coffee or cancel your cable service in exchange for keeping your online streaming services.
Consolidate Your Debt
If you owe multiple creditors, you’re probably paying far too much in interest and this is preventing you from making a dent in your principal balances. Barron Advisors, or another debt consolidation service, can help you by packing everything you owe into one easy monthly payment. This means you’ll get rid of those high interest charges that are keeping you from paying off your debt. You’ll have that extra money each month, which can be used to make additional payments, helping you to pay off your debt even faster.
Use the Snowball Method
Another way to pay off your debt is to use the snowball method, which involves paying off your creditors according to the size of each debt. Begin with the smallest debt, paying more than the monthly balance on that account until the debt has been repaid. During this time, you must also continue paying the minimum monthly payments on your other debts. Move to the next smallest debt and repeat the process. Each time you pay off a debt, take the money that would have gone to make that monthly payment and use it to pay off the next smallest debt. As you follow this method, you’ll find it will be easier to pay off the larger debts.
Tackle the Highest Interest Rates
If the debt consolidation loan you get from a service like Barron Advisors isn’t enough to consolidate everything, you may need an alternative method for paying off your remaining creditors. If your debts are of similar sizes, it may be beneficial to tackle the creditor with the highest interest rates, so your payments will have a bigger impact on your future interest payments. Similar to the snowball method, continue paying the minimum required payments on each of your other debts, as you tackle one high-interest creditor at a time.
Get Rid of Your Credit Cards
Every creditor will recommend that you keep their card to help you cover emergencies. They will tell you this, because they know you’ll be tempted to use their cards once the balance has been paid off. Instead, stash away your credit cards in a safe place where you can use them once every 6 months or so for a small purchase just to keep your account active. This will boost your credit while removing the temptation to get further into debt.
Always keep one credit card with the best terms on hand. Forget about it unless a financial emergency strikes.
Stop Spending Your Windfalls
From time to time, you might receive a bonus or a raise at work. Alternatively, you might win a few bucks on the lottery or receive a cash gift for your birthday and on holidays. While it may be tempting to splurge on something nice for yourself, you’ll be doing more for yourself by using that money to pay off your debts. Just think about how much easier your life will be without those monthly payments. Putting all of the extra income you make into your debt repayment plan will help you reach a debt-free status that much sooner.
Start a Savings Account
As you use these tips to chip away at the debts you must repay, your income versus debt ratio will improve. In order to keep a better balance of that ratio, you will have to prepare for future financial emergencies. You’ll also have to find alternatives to using credit for the things you want. You now have all of this money that you’re no longer paying out to creditors. Instead of thinking of that money as expendable, put it away in a high-interest savings account. This will help prepare you for future financial needs, so you won’t have to rely on credit cards and loans.
While you won’t be able to repay your debts in one fell swoop, making small
efforts consistently over a longer period of time will help you become debt
free. Even taking small steps will help you reduce what you owe, while also
helping you bolster your credit score. Before you know it, you’ll be completely
debt free and able to move forward with your dreams.