Everyone has debt: good, bad, or both. You could be a millionaire or a thousandaire, either way, you still have some form of debt. In this blog article, we are going to discuss strategies to lower your debts.
Higher monthly payments
A great way at reducing your debt faster is through higher monthly payments. This one is pretty obvious and self-explanatory but can play a huge role in the reduction of your debts. If there is a month where you have a little extra savings, don’t spend it or invest it, use that extra cash to pay down your debt. Think about it, the longer you wait to pay off your debt, the more interest it racks up so why wouldn’t you want to pay it down as quickly as possible? The best way to reduce debt is to pay it off in time before it begins accruing interest but if you cannot do that, pay more monthly to reduce the amount faster. If you an pay off the whole amount instead of the minimum payment, do it!
Reduce new debt
This point is a preventative measure all together. If you do not want debt or you are in over your head in current debt, don’t generate more unnecessary debt! If you are struggling to pay off the debt you already have, don’t add more fuel to the fire by increasing your debt amount. Pay off what you have already accumulated in debt before adding more to the pile.
One good strategy for reducing new debt is only charge what you have in cash. I know this is hard to do if you have big expenses but if you can with other expenses, use that rule as a limiting tactic to prevent as much new debt as possible.
Pay off highest interest debt
If you have debt from multiple sources, begin to pay off the debt with the highest interest rates first. The faster you can reduce the one with the highest interest rate, the less interest you will owe. Make larger payments to that debt then move onto the next high interest debt that you have. Once you get into the habit of paying larger amounts more frequently and reducing the highest debt first, you will find yourself back on track with a lower debt burden
Make more money
If even after all the strategies listed, you still find yourself struggling to pay off your debt, consider adding another form of income. Picking up a few extra hours at work, working some side jobs, or adjusting your investment accounts to potentially generate more income are many great ways to earn extra cash to pay off money you owe. Even finding a weekend job that does not interfere with your work week schedule is beneficial because it is crucial that you lower your debt.
If you are unable to make some extra money during the week, consider tightening your budget on necessities for a little while and designate the money saved to paying off the borrowed money.
Talk to a financial advisor
If you still feel in over your head, reach out to a financial advisor; they can establish a plan with you to reduce or eliminate your debt. Once you have a plan in motion, it will be easier to reduce what you owe.
Speaking to a financial planner is beneficial even if you feel as though you can handle paying off your debt because they can work with you on preventative measures for the future. Owing large sums of money is extremely stressful and can cause strain on relationships thus taking preventative measures is important to having a stress-free financial life. Talk to a financial advisor today to develop a stress-free financial plan. Adam Hogue is a CERTIFIED FINANCIAL PLANNER™ who can help you reduce or eliminate your debt and establish a plan for the future to work towards a low debt or debt free future.