Whether you have a large amount of debt or an amount that’s fairly manageable on a monthly basis, becoming debt-free isn’t a simple process. Many people find it difficult to alter their habits, but if you want to live a debt-free lifestyle, you might have to change the way you spend and save money. Fortunately, these tips will help you start working your way to a debt-free life.
Consolidate Large Amounts of Credit Card Debt
Credit card debt typically carries a higher interest rate than installment loans, mortgages, lines of credit, and auto loans. So paying off credit card debt first, helps you save money in the long run. Also, when you consolidate debts, you only pay one monthly payment instead of several. This can help you lower your monthly expenses.
If you have large amounts of credit card debt, though, you might want to consider taking out a personal installment loan to consolidate it. Basically, you would use the funds you receive from the loan to pay off your credit cards. This bundles all of the credit card debt together into one loan with one monthly payment.
To find an installment loan, discuss your options with your bank or credit union. You can also explore online loans for bad credit if your less-than-perfect credit history disqualifies you for a traditional bank-funded loan. Or, you can also try to fix your credit score quickly so you qualify for a loan from your preferred financial institution.
Pay Off Debts From Smallest to Largest
The fact is, it’s easier to stick with a plan when you have some sort of instant gratification. That’s why you should begin eliminating your debt by paying off accounts starting with those that have the smallest balances and working your way up to those with the largest. Dave Ramsey calls this process the Debt Snowball method. Also, he encourages his students to include all non-mortgage debt in their plan including:
- Credit card debt
- Car loans
- Home equity loans
- Personal loans
- Payday loans
- Student loans
- Medical bills
Remember, while you’re focusing on paying off your debts, you have to maintain your minimum monthly payments on all other accounts and household bills. You don’t want to default on your monthly bills to pay off one of your accounts.
Cut Your Monthly Expenses
You can’t become debt-free if you’re constantly spending excessive amounts of money on things you don’t need. While you’re paying off your debts, you should only be spending money on necessities — and you should those expenses as much as possible too.
To limit your monthly expenses you should consider:
- Reduce or eliminate your cable bill
- Switching your cell phone to a lower monthly plan
- Clipping coupons and shopping sales to cut costs on household necessities and food
- Reduce or eliminate subscription services and club memberships
- Raise the deductibles on your insurance policies
Find Ways to Make More Money
If you don’t want to cut your monthly expenses — or can’t — you need to find a way to increase your income. Fortunately, the gig economy makes this fairly easy to do. In addition to taking on a part-time job, you could:
- Become an Uber or Lyft driver
- Deliver food for DoorDash or UberEats
- Offer services on a freelance basis — writing, editing, and graphic design are all good options
- Offer childcare services in your home on weekends
- Sell items you don’t use on eBay or Amazon
Remember, any task you do well can become a service you offer to others. For example, if you don’t work on weekends, you could spend every Saturday doing landscaping work for neighbors, friends, and family members to earn some extra cash. So consider cooking, cleaning, doing laundry, and running errands for extra money when you aren’t at work.
It takes time, dedication, and patience to pay off all of your debt so you can start living a debt-free lifestyle, but it can be done. Simply follow these tips and do your best to stay on top of your finances consistently.