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A Get Out of Debt Strategy That Works

A Get Out of Debt Strategy That Works

    You’ve decided this is the year you’re going to get out of debt once and for all. You’re committed, you’re determined, now the only thing you need is a plan. There are many plans for debt reduction, but they all generally include the same elements. Debt accumulates over time for a variety of reasons. So, it is expected that time will be required to reduce that debt as well.

    Be patient and take it one step at a time…you’ll see results.

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    Get a clear picture

    You have to understand the reality of your indebtedness. It’s impossible to make a plan to reduce debt if you don’t know the extent of it. Be honest. It does no good to deceive yourself about the amount of accrued debt.

    Stop digging the hole

    Don’t accumulate more debt. It’s a never-ending cycle with no way out. Spending habits must change for any plan to be successful. It’s crucial to live within your means, (below your means preferably,) in order to apply that money to debt repayment.

    Build an emergency fund

    Plan for emergencies first. A savings cushion is imperative for several reasons; it will allow some small modicum of security, you will be prepared for a crisis, and you will have liquid reserves for those instances when only cash will do.

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    Figure out where the money will come from

    Track your spending for a while if necessary. Create a budget or if you prefer, call it a spending plan. Make cuts where possible, but be sure to make it livable. A budget does no good if it’s not possible to stick to it.

    Increase your income if possible. Take on extra work where available, volunteer for overtime, or find a second job. Most people don’t want to hear that, but if you seriously want to eliminate debt, sacrifice is necessary. The extra effort will pay off, literally.

    Liquidate other assets

    Consider liquidating other assets. Experts don’t recommend taking money out of a retirement funds, because that will have serious repercussions in the long term. Taking out a second mortgage is the most common tactic, but be careful before you do that. Only resort to borrowing further against your home if you can firmly commit to stopping the cycle of overspending, otherwise you will just accumulate more debt. You are putting your home at risk, so make sure it’s worth it.

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    Do you have any investments or possessions you can sell? While you may be earning interest on your investments, if it’s less than the interest rate on your debt, they may be worth liquidating Consider selling unnecessary equipment, (boats, extra cars, etc.) or valuable jewelry if it doesn’t have extreme sentimental value.

    Decide on a debt reduction plan

    There are many methods to reduce debt. None is better or worse than the other. It’s a matter of choosing what’s the most comfortable for you. Money is a very emotional thing, and so debt reduction is partly mental. Find a plan that you can commit to.

    One option is to pay off the credit card or loan with the smallest balance. Be sure to make the minimum payments on other debts, but concentrate on paying off one debt at a time. Once the smallest debt is retired, move on to the next smallest. The advantage of this method is mostly mental. It allows you to gain momentum and the sense that you’re making progress.

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    Another option is to pay off the debt with the highest interest rate. This is generally the most financially advantageous. By eliminating the higher rate credit cards, you’ll reduce the amount of interest that is paid overall. Once again, move to the next debt item with the highest rate.

    A third option is to eliminate the oldest debt first. Old debts have been hanging around for a long time. These debts have most likely taken an emotional toll. If you finished college 15 years ago and you’re still paying off your student loans, go ahead and pay those first. You’ll feel a tremendous sense of relief.

    No matter the extent of your debt, it’s not hopeless. However, commitment and persistence are vital. Whatever method you choose, if you’re consistent, you will be successful.

    (Photo credit:Get Out of Debt Key via Shutterstock)

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    Royale Scuderi

    A creative strategist, consultant and writer who specializes in cultivating human potential for happiness, health and fulfillment.

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    Last Updated on April 3, 2019

    How to Nix Your Credit Card Debt in Less Than 3 Years

    How to Nix Your Credit Card Debt in Less Than 3 Years

    Debt is never a fun thing to be in. But, there are many actions that you can take that will help you rid yourself of the burden of debt once and for all.

    By coming up with a set plan, eliminating your debt can feel much easier than constantly thinking about it.

    This post will provide some tips on how you can do this to help you nix your credit card debt in less than 3 years.

    Hint: there are ways that are easier than you think.

    1. Consider Consolidating Multiple Credit Cards If Possible

    This may not be applicable to you, but if you have multiple cards – it is something to consider. Keeping up with multiple bills is time consuming.

    It will depend on the balance you have on each. Consolidate ones you can but do not do it to the point that you get too close to the maximum limit. Also, it is ideal to pick the card with the lower interest rate.

    Consider if there are any fees or alternatively, rewards, with transferring a balance to another card. Watch out for fees. Note that some cards offer rewards for transferring a balance to them. This is extra cash that can help go towards paying off your debt.

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    Having one or two cards can make nixing your debt much simpler than keeping up with the balance of a bunch of cards. Keeping track of paying the minimum towards a bunch of cards is time consuming. Spend the time to consolidate instead to make the overall process simpler going forward.

    My tip: Have one main credit card. Have a second one that you use for necessities – such as groceries or gas – that offers rewards for those purchases (a lot of cards do) and set the second one on auto-pay. You should be able to pay off a smaller amount on auto-pay if it is a necessity. If you think you cannot, then you may need to cut down a lot on expenses.

    Why do I suggest doing this? Having one thing set to auto-pay is one less thing to think about. One less thing to waste time on. Same idea with consolidating to one main card. Tracking down too many is a hassle.

    2. Try to Pay the Full Balance You Spent Each Month at the Very Least

    You need to pay off the amount you are spending each month when that bill comes in. This is the amount you spent THAT month.

    Do not let the debt keep accruing while you work on paying any unpaid debt that has accrued. It will become a never-ending battle. Try as best as you can to be current on paying for each month’s expenses when that month’s bill comes out.

    If this is a strain, consider why. You may need to cut expenses. Or you may need to consider other cards. Or look at where this money is going.

    3. Pay Extra When You Can – Every Small Amount Counts

    This cannot be emphasized enough. If you are looking at a lot of credit card debt, it can look daunting, but each extra amount that you can put towards the debt will really add up – no matter how small it is.

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    It does not just reduce the principal amount that you have left to pay off, but it reduces the amount that is collecting interest. You will always save money with that reduced interest.

    4. Create a Plan on How to Pay Extra

    Back to the main point, having this plan is giving you one less thing to think about.

    This plan should be a plan that works for you. If it does not work for you, your spending habits, and your views on debt, then it will not be an effective plan.

    For instance, if a set plan of an extra $50 (or another amount that you know you can afford) works for you, then do that. Set that aside every month and pay that extra amount. Treat it like a bill. Choose an amount that works for you and pay it like clockwork as though it was a bill you had to pay each month.

    Little amounts will not nix it entirely, but they will help tackle it and having a set plan can make it less of a chore. Creating a new plan of how much to put towards it each month is an unnecessary added stress.

    5. Cut out Costs for Services You Do Not Use

    If you are signed up for subscriptions that you do not use because of some free trial or for some other reason, cut it out. Your overall financial position will look better.

    In turn, that will make cutting your credit card debt easier. Look at your statements to find these expenses. If you do not use them, you may forget you are paying some unnecessary amount each month. Cutting it out can really add up in savings that you can put towards other needed expenses.

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    6. Get Aggressive About It

    Consider these points:

    Depending on the interest and the level of debt, you may need to give up a few indulgences. For example, instead of ordering delivery or going out to eat, cook at home. Everything adds up.

    Other things may be more of a sacrifice. It may be a trip you wanted to go on, or a daily latte habit you’ve picked up. In these instances, consider how important it is to you and if it’s worth the sacrifice. And if it is a costly expense, think whether you can wait to indulge.

    Cutting an extravagant expense can really help make a dent in your overall debt. Try not to add to debt when you are trying to pay it off. It will be a never-ending battle. Make it less of a battle with these tips and it will feel easier.

    Bottom line: Do what you can to make this process easier for you. Implement steps that do this. It takes time now, but will help overall. Also, keep track of your spending and paying down of your debts. Which is the next point.

    7. Reevaluate Your Progress at Set Intervals

    Doing a regular check-in can help you see your efforts pay off or maybe indicate that you need to give this a bit more effort. If you check every 3-6 months, it will not feel so much like a chore or feel so daunting.

    By doing this, you will be able to better understand your progress and perhaps readjust your plan. Bonus: if you see it pay off, it will feel great to do this check-in. You will get there.

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    Finally (and most importantly)…

    8. Keep Trying

    Do not get discouraged. Pushing it off will make it worse. Just keep trying.

    Once your debt becomes lower, each monthly payment will reduce the balance more. Why? You are paying less towards interest. It will be a snowball effect eventually and it will become much easier to manage. Just get to that point. And know once you do, it will feel easier and motivating.

    Start Knocking out Your Debt Today

    The best way to eliminate debt is to get started right away. Begin by implementing the above steps and watch your debt just melt away. Try out some of the above strategies and see what works best for you. Soon you’ll be on your way to a debt free life.

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    Featured photo credit: Pexels via pexels.com

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