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8 Strategies to Pay Down Debt

8 Strategies to Pay Down Debt

You’re coming off another high energy spending spree and reality is quickly setting in. No one enjoys the thought of facing debt. A Consumer Debt Outlook study released earlier this year reported that “Americans are on pace to amass a collective $4 trillion in consumer debt by the end of 2018.” The report was based on Federal Reserve Data and compiled by Lending Tree. Obviously, you are not alone! Collectively, Americans owe more than 26% of their income on consumer debt, according to the report. This can include everything from personal, auto and home loans to credit card debt, medical debt and more. If you’re searching for a way to pay down debt, here are some tips.

8 ways to attack debt

  1. First, understand how much debt you really have. Make a detailed list of all of your debt, the various interest rates, and your monthly payments. Many people don’t realize the extent of their indebtedness or the high rates of interest they are paying until they look at it as a complete list with balances. This will help you to determine the total you owe and the best plan of attack.
  2. Prioritize debt payment in your budget. Evaluate your monthly budget to find ways to divert more funds to pay down debt. A big mistake many of us make is not budgeting to pay down our debt. Commit to paying as much as possible towards your debt until it is completely paid off. You may need to make some sacrifices, but you will feel relief when you are debt free. Get an unexpected holiday bonus or perhaps anticipating a refund check? Plan on using that extra money to pay off your debt.
  3. Stay consistent. If you’re behind on payments, get caught up, because you don’t want to ruin your credit score. Consistency is key in your plan of attack on debt.
  4. Concentrate on paying down the higher interest balances faster. Make higher payments on that high-interest debt and minimum on lower interest debt. Remember, with credit card debt, your goal should be to reduce that principal balance quickly to limit the interest that can accrue.
  5. Refinance your debt by consolidating high-interest debt into a lower interest debt consolidation loan. This can be a good way to consolidate all debt into one single payment. If you can consolidate at a better rate, you may be able to save on interest. Choice One Community Credit Union has many loan options available to credit union members.
  6. Don’t incur any additional debt while you’re working to pay off existing debt. Lock up those credit cards! Here’s a bit of inspiration, once you are actually debt free, imagine what you can do with the extra money you’ll have in your budget. Vacation anyone?
  7. Raise some extra cash to go towards debt payment. Just can’t seem to make ends meet and lower your debt, consider selling some items on eBay or have a garage sale and use the extra money to pay off your debt. We all have an assortment of items lying around that we don’t use. Ever hear the expression that one man’s junk is another man’s treasure? Well, it’s true. Take an inventory of some things that you can sell, such as unused furniture, exercises equipment, electronics, and tools or just about anything of value. Use the extra cash to pay down debt.
  8. Give your income a boost. Consider getting a part-time job to help with your debt payments. There are jobs out there to fit just about any schedule, from a dog-walking gig to a restaurant or retail position. A part-time job may also keep you occupied and prevent you from overspending.

Most importantly, understand there’s no quick, easy fix to paying off debt. You just have to commit to making those payments a priority and bringing down your balances. As you begin to pay off entire balances, you will soon see light at the end of the tunnel and it will inspire you to stay committed.

Finally, after you’ve paid off your debt in full, start an emergency savings fund. This could help prevent you from getting into debt again. It’s important to anticipate emergencies and be prepared. This will also help you get into the habit of saving. Once you have a nice emergency fund put away, continue your savings plan. When it comes time for a large purchase or the next holiday rolls around, you’ll already have money put aside. You should also commit to paying down credit card balances in full each month. If you can’t pay it off, just don’t charge it. Practice willpower when it comes to spending!