Whatever your
financial standing may be, you can gain control of any outstanding debt and
start improving your finances. The faster you are able to repay what you owe,
the sooner you’ll be able to grow your net worth. Use the following tips to
start reducing your debt today:
1. Stop Frivolous Spending
The first step to begin eliminating debt right now is to stop all unnecessary spending. This includes anything outside of basic essentials and bills. This can take the form of not getting the latest smartphone or simply making every effort to live within your means.
By cutting back on these unnecessary expenses, you’ll be able to save more money monthly. Once you grow accustomed to saving a preset amount each month, you’ll be better able to set aside discretionary funds for investments that will help improve your net worth.
Shoppers that do a significant amount of Internet shopping may not realize that their credit card information is still stored on the site. Having this credit card information saved can make it too tempting to make unnecessary purchases. By changing these settings, you’ll make another small step towards eliminating debt by making sure you don’t take on any more.
2. List All of Your Debt
The next step in eliminating your debt is listing out everything you owe. As not all debt is bad, the experts from Truman Advisors share that it’s important to clarify which debts you need to repay first. Debt like student loans, mortgages, and other debts that have helped you improve your financial position aren’t considered bad debt if you are actively making your monthly installments. Bad debt includes the type of debt that won’t improve your financial standing, like a personal bank loan or credit card debt.
List all your bad debt by starting with the minimum monthly payments you owe to creditors and their interest rates. Having this information clearly written out will allow you to prioritize these debts, ultimately providing you with a new perspective on the total amount of debt you owe.
3. Pay Off Your Most Expensive Debt First
Choosing to pay off your most expensive debt before all the others will help you cut through your debt faster. Paying off the balance that has the highest interest rate will allow you to increase the amount you pay to the card that has the next highest annual percentage rate. As you do this, continue to make your regular minimum payments to your other credit cards.
4. Don’t Always Pay the Minimum
Paying the minimum isn’t quite as effective if you are hoping to really make an impact on your debt. Paying more than the minimum will help you work through your debt at a faster pace. Instead of paying a monthly balance, try to make weekly payments. This effort will allow you to make significant strides towards completely wiping out the debt that you owe.
5. Use Balance Transfers
Have a high-interest card with a low enough balance you can pay off in one or two months? Truman Advisors suggest transferring this balance to a card with a zero-interest balance. While you’ll have to pay the debt off before the transfer expires, you can use this strategy to save hundreds of dollars on interest.
Keep in mind that though you may not be able to transfer your entire outstanding balance to low-interest rate credit card, transferring a smaller portion can still positively impact the rate at which you pay off your debt. As you research the best transfer options, keep in mind that balance transfer fees will more than likely apply unless stated otherwise. Oftentimes, such fees may be 3% of the amount transferred and can climb up to a specific capped dollar amount.
6. Spend Work Bonuses Wisely
Instead of putting your work bonus towards a new vacation, start using that extra money to pay off your debt. Allocate any additional bonuses you get toward a debt payoff plan. Once you’ve successfully started making gains towards growing your net worth, you’ll be able to take those luxury vacations later on in life.
7. Bolster Your Income
If you currently have one stream of income, finding ways to bolster this will free up more cash that you can use to help minimize your debt even further. Consider taking up freelancing jobs online or selling lightly used clothing or furniture. The more money you make and can allocate towards paying off debt, the faster you’ll become debt-free.
As long as you still have outstanding debt, your net worth isn’t all that it could be. Don’t let your debt keep you from reaching your financial goals. Apply these seven strategies to your life to start eliminating your debt and put you on the fast track to improving your net worth.