You already know the basic principles for getting out of debt: spend less than you earn and pay as much as you can on your debts. Keep this approach up, and you’ll eventually get out of debt.
“Eventually” is the problem. The average American has $104,215 of debt, which can take a long time to pay. During that time, you’ll be constantly watching your money, which makes it difficult to sustain. The sheer challenge of paying off debt can make it seem unsurmountable and prevent you from starting.
Fortunately, it doesn’t have to be that way. The following steps can help you eliminate debt fast.
Calculate Your Financial Position
The first thing you have to do is acknowledge that you’re carrying too much debt. Even if you can afford your debt, you can follow these steps to eliminate it.
You’ll want to review your bank statements and list every expenditure you’ve made in the past three months. Separate them into bills and other purchases. The more detailed the list, the easier it will be to see where you can cut costs.
Write down all the money that comes into your home every month. Hopefully, this is more than the list of expenditures.
Either way, you now know your true financial position.
Eliminate Unnecessary Expenses
Listing and grouping expenditures make it easy to see where you can cut costs. For example, it will illustrate that your daily cup of coffee, which costs, on average, $5, costs you as much as $140 a month (assuming you have one every day of the week).
You’ll also see the subscriptions you pay. Some of these are worthless. For example, the gym membership even though you never use the gym. Others can be reduced. Finding cheaper cable, insurance, and even energy suppliers is usually possible.
Once you’ve canceled all unnecessary expenses and reduced any you can, you should redo your income and expenditure list. It will show you how much you have spare to throw at debts.
Prioritize Debts
It’s important to have a plan when paying down debt. The logical approach is to pick the loan or credit card with the highest interest rate and start paying extra against it. This reduces the amount of interest you’ll be paying.
However, if the debt is high, it can quickly seem like you’ve been targeting debt and getting nowhere.
That’s why many people prefer to pay the smallest debt off first. This makes you feel like you’ve achieved something, motivates you, and will likely free up more funds to throw at the next debt.
Consider Consolidation
Consolidation isn’t for everyone. It can leave you feeling back in control and prevent you from changing your spending habits. That won’t help you get out of debt.
However, if you can stick to your plan, consolidation may make it easier. You’ll have one debt to target, and you can ensure the loan conditions allow you to pay it off early.
Invest In Your Future
You’ll likely start looking at what you can sell at this stage. For example, you could sell your car and get a cheaper one, allowing you to pay off your debt.
In most cases, you will make a tiny dent in your debt. While that is better than nothing, if you truly want to get out of debt fast, it’s time to invest in yourself.
In short, you want to create additional income. This must fit into your spare time and should be something you enjoy. The internet has made it easy for many people to find freelance jobs. It can be a valuable way to earn extra.
Equally, consider something more significant, like flipping houses. Assuming your credit is still good, you can remortgage your existing home to secure a second property. You’ll need to factor this into your budget. You’ll then need to renovate the property within a set timeframe and budget. This will allow you to sell it, repay the additional mortgage on your home, and pay off some or all of your debts.
As a bonus, it can become a lucrative sideline or a full-time business.
Review Regularly
Whatever path you choose, it’s essential to review your progress regularly. This will help you stay on track.
You should recreate your expenditure and income sheet every few months to ensure you haven’t drifted into your old ways.
Summing Up
It is possible to get out of debt fast. You’ll need to make a few changes to your lifestyle, but this can also be the push you need to start doing something for yourself.
In short, making these changes will likely transform your life and potentially give you a bright new future.
