About 80% of people living in the U.S. have some debt, most often in the form of mortgages, car loans, credit card debt, and personal loans. While some people can manage their debt and pay it off, many people find themselves buried under an ever-growing mountain of debt that they see no way to get rid of. Fortunately, there are ways to get debt under control, even when the amount is very high. The following are some expert tips for getting out of debt.
Pay Off One Debt at a Time Using the Debt Avalanche Method
One of the best ways to get out of debt is to attack one debt at a time, starting with the one that has the highest interest rate. Every month, make only minimum payments on all other debts, but pay as much extra as possible to the high-interest one. As soon as that debt is paid off, take that minimum payment and use it to pay extra on the next highest-interest debt. The key is to keep the same amount going to debt each month, always re-investing the minimum payment from a completed debt into the next.
Put More Money toward Debt by Spending Less
There are many ways to cut down on spending that many people never think of. One strategy is to cut back temporarily on extras like restaurants and entertainment. Cooking and making coffee at home are two of the best ways to save money every day. Getting rid of cable and streaming on a single platform or watching content for free on YouTube is another great way to minimize monthly bills. Utilities can sometimes be reduced through negotiation or bundling services, like internet and phone. It may seem tedious to research the options and make the customer service calls, but doing so can free up money for paying down debt.
Get a Side Job to Increase Income
In the era of the gig economy, there are more ways than ever to make extra money. Examples include driving for Uber or a similar service, delivering packages for Amazon, doing odd jobs through TaskRabbit, and offering pet-sitting services to neighbors. People who have a house full of stuff they’re not using can also increase their income by selling it on eBay or through local online yard sales. Another way to get more money coming in every month is to put a hold on any form of investment, even IRA contributions.
Consider Debt Consolidation
Debt consolidation can be a useful tool for paying off debt. It works by rolling several high-interest debts into a single new debt, often with a lower interest rate. Debt consolidation services typically pay off credit card debt, student loans, and personal loans, but they may not accept mortgages and car loans. Debt hunch helps match clients to the debt consolidation services that best meet their needs.
Getting out of debt is hard work, but the relief it brings is worth the effort. The key to staying debt-free is to control spending, which may require a permanent lifestyle change.