Debt can destroy your financial dreams. Whether you carry a small balance on your credit card each month or are staring up at a mountain of financial obligations, debt makes it impossible to get ahead.
Paying off debt requires dedication, determination and persistence. Here are a few smart ways to pay off debt fast:
1. Stop using credit cards
If you really want to get out of debt, stop using credit cards. The more you swipe, the more the balance climbs. Even if you continue to use your card, avoid leaning on perks such as the ability to take cash advances. As we explain in “The 10 Most Common Credit Sins and Mistakes“:
Unlike when you withdraw cash from your bank account via debit card, a cash advance via credit card generally costs you a steep cash-advance fee as well as a steep interest rate. In addition, interest charges start accumulating immediately, usually from the day you take out the loan.
Having a hard time letting go? Try freezing the cards in a cup of ice. By the time you are able to access them again, hopefully you will have changed your mind about spending.
2. Pay as much as you can afford each month
Creating an emergency fund should be a top priority. But once you have accomplished this goal, use any funds at your disposal to pay down debt. The more you pay, the faster you’ll be free of your obligations.
Did you save money at the grocery store by stacking coupons with sales? Use the savings to pay off debt. Did you work some overtime last week? Apply the extra earnings to your debt.
3. Make cuts to your spending
Take a good look at where your money is going and separate necessities from mere wants. Skip daily trips to the local coffee shop or to your favorite lunch spot. Over time, these savings can add up. Use them to dig out of the hole much quicker than you probably expected.
If you are struggling to figure out which expenses you can cut, start by crafting a budget. Use software such as You Need a Budget to help you get spending priorities on track.
4. Double up on payments
Congratulations if you have paid off one credit card. However, accomplishing that goal doesn’t mean it’s party time. Keep the momentum going by allocating those funds that are now freed up to the next balance in line.
5. Use windfalls to pay down balances
If you get a sudden windfall — such as a tax refund or bonus at work — don’t spend it on a splurge. Instead, bite the bullet and use a portion of the funds to pay off debt.
6. Freelance to earn extra money
Try your hand at freelancing to make a few dollars on the side. In some instances, you may be able to generate a substantial amount of cash, all of which should be contributed to the debt-payoff fund.
For some ideas on trading your skills for cash, check out “19 Unusual Ways to Earn Extra Cash.”
7. Tackle debts with the highest interest rates first
Although some prefer the debt snowball method — which suggests that you pay the debts with the lowest balances first to build momentum — it makes more financial sense to clear those debts with the higher interest rates first. The ultimate goal is to pay off debt, however, so the choice is yours.
8. Don’t sacrifice the things you love the most
Paying off debt may require you to make a few lifestyle changes, but it doesn’t have to be depressing. If you have a difficult time adjusting to new circumstances, implement gradual changes so the process won’t become too overwhelming.
And if you need help, check out our Solutions Center. There, you will find the following sources of debt-related help:
Do you have any other debt-reduction tricks? Feel free to share in the comments below or on our Facebook page.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.