If one of your New Year’s resolutions is to becoming debt free, but you’re not sure where to start—well you’re in luck because we’ve put together some ideas on how to become debt free before you know it.
A plan, persistence, and making debt reduction a priority are key to helping you become debt free. If you have outstanding debt, the following tips are just for you.
Take at least 10 to 15 percent of your paycheck or other income and put it toward your debt. Making larger payments helps you pay it down more quickly versus making the minimum monthly payment toward your balance. You have to remember your debt is collecting interest each month.
If you have more than one credit card or loan, put more toward the account with the highest interest. As you pay off that debt, move on to the next highest interest and so on. When you pay off large portions, it saves you a significant amount of interest accumulation.
Start couponing but don’t take it overboard. Only use coupons to purchase items you already buy. Cut out unnecessary extras like cable and going out to eat. Not only is eating at home healthier but it’ll save you a ton of money. Make your coffee at home instead of hitting the local coffee joint. Put a stop to impulse buying by creating a shopping list and sticking to it. Finally, learn to say “no” to your kids, spouse/partner, and yourself.
It is perfectly acceptable to use some of your savings to pay off your credit card debt, especially if your savings are not accruing as much as your debts. Sure, you think having cash in the bank is a good move—and it usually is—if a high-interest credit card is gathering more in interest, then it’s best to pay it off first. Don’t use all of it to pay off your debt. You should have enough in the event of an emergency.
Tax season has arrived. While the idea of using your tax refund check to take a vacation or purchase the latest premium UHD television is alluring, don’t do it. It would be wise to use your tax refund to pay down some of your debt.
Negotiate a lower interest rate with your creditors. If you have a good relationship with your creditors, many are more than willing to reduce your interest rate especially if you have a good payment history. The reduced interest rate will help you save some money on your debt.
People in the U.S. pay nearly $1.2 trillion on goods they really don’t need. Consider selling your old items on Craigslist, LetGo, Facebook, eBay, or even at a garage sale. This option is not guaranteed to bring in a steady stream of additional money. Use the funds to pay off some of your debt, which is only going to help you in your journey to becoming debt free.
A really quick way to pay down your debt is to increase your income by taking on a part-time job or by asking your boss for a raise. If you already work a 9 to 5, then you could take a job waiting tables in the evening and on weekends. Where there’s a will, there’s a way. If you’re highly determined to rid yourself of all debt, this is definitely the fastest way to do it.
Commonly known as a “life settlement,” this might be an option if you have a whole life policy that has built up cash value. If you have beneficiaries, you still may be able to use a portion of it to pay off your debt.
The money you receive can give you the opportunity to pay off built-up debt but proceed with caution because it could result in unintended consequences such as not qualifying for Medicaid. If you opt to sell your life insurance policy, speak with a professional to find out all of your options.
If you have the option to transfer your high rate debt to a zero percent deal that lasts at least 12 months, then take it. It essentially eliminates your interest, freeing up additional funds so that you can pay off your debt faster. Also, consider consolidating your debt into a single bill.
Some debts older than 7 to 10 years old tend to fall off your credit report. This means you are no longer legally obligated to pay it. Yes, responsible individuals want to pay off their debt. However, if you have to choose between really old debt and new debt, focus on paying off the current debt. The statute of limitations vary from state to state, so it’s best to find out the laws in your particular state and to seek assistance from the consumer protection agency.
This tactic should only be utilized when you have no other options. Filing Chapter 7 and Chapter 13 Bankruptcy mainly covers unmanageable credit card and other unsecured debts. However, it does not normally cover debts like student loan debt, tax debts, alimony, child support or secured debt. In some instances, Chapter 13 can help you when Chapter 7 cannot. Before going down this route, speak with a professional familiar with bankruptcy laws.
When you begin down the path in your quest to become debt free, remember that it’s only temporary. For every significant debt that you pay off, reward yourself with something small, yet fun. Plus, as you pay off your debts, you can begin repairing your credit score.
After you become debt free, develop a budget that you can stick with and make better purchasing decisions to avoid going back into debt again. If you’re ready to stick to your New Year’s resolution to get out of debt but you’re not sure where to start, give us a call at (954)-765-3166 for a free consultation today.
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