Debt seems like an inevitable part of life. It seems that everyone and their mom is buried dangerously deep in debt. Because it’s such a common life problem, no one really seems to be too concerned with how much of an issue this can be. When you meet someone who tells you they have no debt at all, not even on their house, you’re simply floored, because they’re doing the impossible. Or what feels impossible to you.
How you got here
Getting into debt is a lot easier than getting out of debt. Whether all of your debt was for practical reasons like a car or a house, or if you’ve simply racked up enough credit card debt that you want to hide all of your visa bills in a shoebox under your bed, debt is scary. It’s a slippery slope, once you realize that you can spend money that you don’t have on things you want immediately, and you forget that there will be consequences down the road!
Small debt first
If you have credit card bills stacking up, the first step to getting yourself out of debt is to start small. You’re not going to be able to pay off all of your debt in one day, and that’s okay. Don’t let yourself get overwhelmed with the amount of debt that you have. Create a simple plan to pay off your debt slowly, and start with the smallest bills first. If you’re able to remove an entire bill from your list of debts, you’ll feel encouraged, because you can do this! Every victory, even small, is important.
Leave your credit cards at home
You don’t want to fuel the problem. Don’t cancel your credit cards, even after the debt is paid off, because this will hurt your credit score. Instead, store your zeroed out cards in a safe place, but not in your wallet. Otherwise you’ll be tempted to use it when you want a quick $5 coffee as a pick me up. That $5 coffee will start adding up, and then you’ll be left with a hefty bill at the end of the month to add to the others.
Use all extra income to pay off debts
Your first priority should be getting out of debt. Don’t let yourself rationalize spending more money on things you don’t need. Even if it’s just an extra $20, use that on your credit card balance. If you do that 5 times in one month, you’ll find yourself $100 closer to being out of debt, and it’s a lot easier to make small payments over time, than one large payment at the end of the month.
Student loans and other large debts
Some debts are pretty unavoidable, like your student loans and your mortgage payment. The first step to paying off these sorts of debt is to know your loan and be informed. Look up what your interest rate is, whether the loans are federal or not, and what your estimated payoff date is. This article has more helpful tips for handling student loans. Oftentimes with loans, especially student loans, the majority of the money that you’ll end up paying will be interest only.
With loans like personal loans, auto loans, and mortgages, you can often get them refinanced in order to lower your interest rates. This is especially helpful if you happened to get a loan when you were in a tough financial spot and your credit score was poor. Once your credit score has improved, usually after a minimum of a year, you can go to your banking institution and get your loan refinanced. If they’re able to lower your interest rate, you can either make lower monthly payments, or accelerate paying off the loan by paying the same amount but over a shorter amount of months.
Be smart with your debt, don’t leave it to anyone else
If you have a considerable amount of debt, it can be scary to think about this burden falling onto the shoulders of family members in the event that you were no longer able to make payments. It can be helpful to set up estate planning, to ensure that your mortgage and other debts will be taken care of in the case of death, so that way your family won’t have payments to take care of and worry about. Estate planning is also a way of saving for the future and looking towards retirement. Many people make the mistake of thinking that it’s a step that’s only for the rich. It’s not true! Smart planning makes it accessible for everyone.