It’s a little known fact that most Americans carry debt, with the average household owing $10,000 in credit card debt. When it comes to paying bills, it may be more complicated than it seems, so here are strategies that can make paying off your debt more affordable and efficient.
1. Pay more than the minimum
Paying just the minimum each month prolongs the life of your debt, which means the bank profits from the interest. Though minimum payments may seem more manageable, you’ll find that it seems like your debt keeps steadily growing, no matter how much you chip away.
Most experts agree that the average credit card interest rate hovers around 15 percent, which means by the time you pay off what you owe, you’ve already given the bank much more than what your balance was.
2. Be frugal and downsize
By tightening your financial belt, you’ll be able to allocate more money to paying down your debt. If you do an overview of all your finances and track what you spend, you’ll be able to make the tough decision of deciding what can go.
Of course, brown bagging it to lunch every day at work doesn’t feel fun, nor does only shopping for groceries when they’re on sale or you have a coupon, but cutting all the excess out of your life means that you suddenly have a lot more money to go towards essentials.
3. Pay off the most expensive debt first
A common way to pay down debt is by implementing the “snowball budget,” in which a person pays off their smallest debt first and snowballs their way to the heftier debt.
However, some financial advisors suggest getting rid of the most expensive debt first, and for logical reason. Paying off the biggest debt first eliminates the largest source of fees and interest quickly.
4. Cash out your savings account
Cashing out your savings is a last resort option to paying off debt, but taking care of an issue that threatens to become overwhelming is a smarter move to make than sitting on a pile of money saved for the vague future. Even if you don’t have a decent nest egg, you can find alternate sources of money, such as cash back rewards you’ve been carefully accumulating for the past couple of years. Again, no one likes to hand over a fistful of money, but the alternative is to let your finances spiral out of control and take over your life while destroying your credit score.
If you’ve got a decent amount of debt weighing on you, pay off debt with these strategies to begin your rapid escape from a pile of bills and balances. By practicing self-restraint and discipline, you can get yourself out of a dire financial situation, and on the path to recovery.
Have more questions? Stay tuned for part two, in which we will focus on more complex ways to deal with heavy debt.