There is nothing fun about being in debt. It is something that is constantly on your mind, and it is a problem that only seems to get worse and worse as time goes by. It is difficult to make enough money to meet your current expenses while also chipping away at your past debts.
However, if you want to pay off your debt and move on to a debt free future, you will need to come up with a smart and effective game plan.
Following are five tips for crafting a plan to kill off debt in 2016.
Pay Over the Minimum
If you can’t afford to make huge payments on your debt each month, you should strive to at least pay a little bit over the minimum amount due. If you only pay the minimum, your debt isn’t going anywhere anytime soon – so even paying $20 over the minimum each month is a helpful start.
As you are putting together your budget, don’t plan on making minimum payments. Instead, commit to going at least marginally over that minimum to make head way on your balances.
Make Money on the Side
If you work five days a week at your day job, you may be able to pick up some additional work on the weekends with the intention of sending that money straight toward your debt. This work could either take place in the physical world (such as working at a retail store on Saturday and Sunday), or you could find some online work that you are capable of doing on the side. There are many opportunities so be sure to explore this possibility too.
Look at Consolidating Your Debt
Consolidating debt isn’t the right choice for everyone, but it can be a great solution for some people who need to lower their interest rates. If you are paying on a number of high interest credit accounts, you might want to look at consolidating those debts into a single, lower rate account.
However, when looking at this option, make sure you don’t have to pay too many fees in the process or you might negate any advantage that you gained through the lower rate. There are many options to consider, such as Avant, that allow you to save money on interest and become debt free quicker.
Build a Tighter Budget
In addition to finding ways to make extra money you can also find ways to save some money at the same time. While parts of your budget aren’t going to change no matter what you do, it is probably possible to trim your expenses in certain areas such as entertainment or travel. It might not be fun to make these short term sacrifices, it will be well worth it when you see your debts disappear.
Refinance Your Home
This is another option that won’t be right for every individual, but it could be a great solution to your problems. If you own your home and have some equity in the property, you could look at refinancing as a way to raise money that can be used to pay off high interest debts. The interest rate you get on a new home loan will almost certainly be lower than your existing debts, so this is a plan that can work out under the right set of circumstances.
Are you in debt? What is your plan to pay off debt this next year? Are you going to try any of these strategies?
Photo courtesy of: Dan Moyle