If you’ve ever considered paying off your debt, you may have balked at the thought of depriving yourself and living like a hermit for the rest of your life. Little luxuries like your Starbucks latte or your not-so-small shoe habit may seem like they would become distant memories on the horizon.
Yes, we could certainly start the business, pay the mortgage off, squash that credit card debt with a few financial sacrifices. Yet, for many, if not most of us, making a harsh and not necessarily realistic plan for our finances ends up having us hating life and splurging on the most expensive pair of Louboutins you can slide your feet in.
This is why it’s so important to tackle paying off debt in a realistic and sustainable way.
Here are 7 ways to get you on the path of debt repayment, minus the intense stress and social isolation:
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Start with a reality check
Ok, let’s begin at the beginning. It all starts with understanding and realizing where you stand financially. This means looking at your credit and debt history straight in the eye. While it can be easy to turn a blind eye to your debt situation, getting a reality check will get you started well on your debt repayment process.
Credit Karma provides you with a free credit report, in addition to detailing your credit history. It allows you to see your debt amount, as well as any debts in collection, and even your monthly payments and interest rates.
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Earn extra income
Here’s the thing: when you already are in debt and still have to pay for your normal expenses, saving money to pay off your debt can be challenging. This is where making extra income comes into play.
For many, if not most of us, one of the best ways to pay off debt is to have a profitable side hustle. Whether it’s selling Avon products, have a side blog, or being in network marketing, finding ways to create additional income can go a long way towards squashing your debt.
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Start with the highest interest rates
Once you have money available to pay off your debt, start looking at the interest rates on your credit cards and other debt instruments. You will notice that some of them have much higher interest rates than other, at times up in the 20% range. The cards or debt instruments with the highest interest rates will cost you more in the long run, as you will be stuck paying insane amounts of interest rather than directly paying off the principal or main balance you owe. This is also how credit card companies are making money, by having us pay loads of interest, which is basically free money for them.
My preferred approach is to tackle the cards or debt instruments with the highest interest rates first. For these cards, I plan to increase my monthly payments, and when I can, even double or triple them to pay them off faster. This allows me to limit how much interest I have to pay in the long run, and reduce my debt bill overall. The trick is to pay these off, and once you’re done, go on to the next credit card with the highest interest rate. And so on and so forth…
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Or pick the lowest debt amount
Another approach is to tackle the cards or debt instruments with the lowest amount to repay. This can be a gratifying process as it allows to eliminate small debt amounts first and faster. Many people are encouraged by this system, as it lets them see the result of their efforts earlier on.
Here too, the point is to reimburse your lowest debt amounts first, and move on to the next lowest amount.
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Put your savings on auto-pilot
Apart from earning extra income and choosing an approach for debt repayment, saving money also plays a role. However, when it comes to saving, automating the process can be more effective.
The Digit app monitors your spending habits, and easily withdraws money from your checking account into a rainy day savings account. The amount saved varies from person to person. The app takes into account your unique financial situation through your spending habits to do this. Another alternative is Stash.
Another tool that helps you save money is the Trim bot. It’s basically like a financial assistant in your phone. From canceling subscriptions you’re not using, to helping you negotiate your bills down, it just assists you in making better financial decisions and saving.
Another way to trick yourself to save on your credit card purchases is to use the Debitize app. Basically, you make purchases on your credit card, and the purchase amount is automatically deducted from your checking account in order to pay your credit card bill at the end of the month. This way, you reap the credit card rewards without the associated headaches.
Last but not least, earning cash back on your purchases and expenses is another way to save. Apps like RetailMeNot, Groupon, and Living Social, for instance, can help you score deals and save.
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Sell your extra stuff
Most of us have more stuff that we could possibly use. Sometimes, it takes a bit of humility and a lot of financial sense to use that extra stuff for the purpose of debt repayment. For bookworms like myself, Bookscouter lets you sell your old books.
Letgo is a great app to help you sell second-hand stuff on the go.
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Get it for free
Having fun while you’re trying to pay off your debt can be quite the challenge. For many of us, having fun is directly linked to spending money. Whether it’s a $5 latte or a $100+ night out with the girls, entertainment often comes with a bill.
However, there are many ways to enjoy life without getting off track when it comes to paying off your debt. You can enjoy public parks, public and free attractions at no cost. Instead of dropping your coins on books, how about going to your local library? Even better, you can become a mystery shopper and get paid to enjoy things you would normally have to pay for.
How do you manage to pay off your debt quickly and realistically?
To Your Success,
The Corporate Sister.
