You try your best to make your payments, but interest charges eat up all your progress. Next month, you’re back to square one.
Sound familiar? Don’t worry: You don’t have to be stuck with debt forever. We reached out to several experts and got their best tips for how to get out of debt.
Before you get into the nitty-gritty of debt payoff, start by figuring out the big reason why you want to be debt-free. This is crucial for keeping yourself motivated when things feel difficult, according to Fo Alexander, founder of Mama & Money and author of “Dump Debt & Build Bank.”
Once you identify the motivation for paying off debt, it’s time to figure out where you currently stand and devise a basic budget.
“You need to know what goes in and out of your household and whether those expenses can be covered with your income,” said Leslie H. Tayne, a debt solution attorney and managing director of Tayne Law Group, P.C.
Once you have a basic budget in place, take a look at your discretionary spending (AKA your “wants”) and look for opportunities to cut unnecessary spending. Don’t worry: You don’t have to live on a barebones budget forever.
You can only scrimp and save so much. In addition to cutting your spending, another way to pay your debt more aggressively is to earn more income. “It doesn’t have to be a part-time or full-time job, either,” Tayne said. “Side gigs, such as baking, photography, dog walking, babysitting, ride-sharing, or turning unoccupied space in your home into a rental, can all generate extra income.”
When it comes to paying off debt, the standard advice is to tackle the debt with the highest interest rate first and work your way down (also known as the “debt avalanche” method). From a mathematical perspective, this is the best way to save money in the long run.
Paying the minimum payment due on your debts will ensure you avoid late fees. But when it comes to getting rid of your debt completely, it’s important to pay more, according to Tegan Phelps, founder of The Blissful Budget.
9. Set up Automatic Payments
Another mental roadblock to paying off debt is having to take money out of your bank account and send it off to your lenders. Physically moving your hard-earned money between accounts can be a mentally painful process.