Debt is like an annoying houseguest--you don't want it hanging around any longer than absolutely necessary. Whether you have crushing credit card or personal loan debt, or if you just have ''typical" mortgage or auto loan debts, these tips can help you reduce your debt more quickly so you can afford to put more money into your savings account.
Get on a budget
Don't be intimidated by "the B-word." Think of it as telling your money what to do instead of being led by your wallet. A basic budget should include everything that you need to spend money on first. If these necessary expenses don't use up all of your money, you can add discretionary items (those that you want but don't need) to your budget. If you don't have enough money coming in to pay for wants, they have to wait until you do have the money for them.
Don't spend any money on anything that isn't listed in your budget! If you have money left over, it should be used to pay off debt and some of it should be put into a savings account to cover any future financial emergencies that may pop up.
Stop borrowing money to pay off your current debt
This sounds so simple, but for many people stuck in a cycle of payday-to-payday living, it can be difficult. Payday loans are useful in a pinch, but you shouldn't rely on them for every emergency. Ideally, you'll have 3-6 months' worth of living expenses saved up to cover emergencies and unexpected expenses so you won't have to borrow money to pay for them.
It may be tempting to use your credit card to cover costs when money is tight, but the interest you'll pay will only put you deeper into debt. Instead, try spending less on certain items in your budget, such as groceries or entertainment expenses, until you can get through the tight times.
Make a plan to pay off debt
Once you've grasped the concepts of budgeting and saving money, you need to make a conscious effort to pay off your debts. The most effective way to do this is to organize your debts by either size (how much you owe on each debt) or by interest rate. You can choose to tackle those debts with a higher interest rate first if you want to save money on interest, but choosing to pay off smaller debts first can motivate you to want to pay off the rest of your debt faster. Either way, focusing your attention and money on paying down your debt will help make it disappear faster.
Find money to pay down debt faster
Get the whole family involved in a "money-finding" challenge so you can pay your debt off even faster. Hold a garage sale to get rid of unwanted items from your home, pick up extra shifts at work, or consider taking on an extra part-time job to bring in more money to pay off your debt. Remember, you won't have to work so hard once the debt is gone, but you may find that you enjoy saving the extra money after the debt is paid off, so it can also be a great way to build up your emergency savings.
One easy way to "find" money to pay off debt is to reduce your spending on entertainment activities. If you have cable or satellite television, consider reducing your current package to save money, or cancel the service and use streaming services instead. You can save a substantial amount of money doing this, and you can always subscribe again later on if you really want to. Small sacrifices now mean you can be debt-free even faster, so make cuts wherever you can.
Most people don't go into debt overnight, so don't be surprised if it takes a while to pay off your debt. Using these tips and changing the way you think about borrowing money can help you become debt free faster so you can enjoy more of your paycheck when the debt is gone.
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