Are you swimming in debt and don’t know how you’re ever going to pay it off? You’re not alone. If you’re looking for easy ways to cut down your debt, including intuitive tweaks to your debt payoff strategies and habits, follow the advice of these current and former U.S. News My Money bloggers.
Before you start repaying debt, take a moment to identify the kind of debt you have – whether it’s credit card debt, student loan debt, mortgage debt or something else – and determine how much debt you have. Understanding the type and amounts of your loans can help you come with a personalized plan for debt payoff.
Create a Budget
“The first step to solving your debt problem is to establish a budget,” writes former U.S. News contributor David Bakke. You can use personal finance tools like Mint.com, or make your own Excel spreadsheet that includes your monthly income and expenses. Then scrutinize those budget categories to see where you can cut costs. “If you don’t scale back your spending, you’ll dig yourself into a deeper hole,” Bakke warns.
Pay Off the Most Expensive Debt First
Sort your credit card interest rates from highest to lowest, then tackle the card with the highest rate first. “By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards,” writes former My Money contributor Hitha Herzog.
Pay More Than the Minimum Balance
To make a dent in your debt, you need to pay more than the minimum balance on your credit card statements each month. “Paying the minimum – usually 2% to 3% of the outstanding balance – only prolongs a debt payoff strategy,” Herzog writes. “Strengthen your commitment to pay everything off by making weekly, instead of monthly, payments.” Or if your minimum payment is $100, try doubling it and paying off $200 or more.
If you have a high-interest card with a balance that you’re confident you can pay off in a few months, Trent Hamm, founder of TheSimpleDollar.com, recommends moving the debt to a card that offers a zero-interest balance transfer. “You’ll need to pay off the debt before the balance transfer expires, or else you’re often hit with a much higher interest rate,” he warns. “If you do it carefully, you can save hundreds on interest this way.”
Halt Your Credit Card Spending
Want to stop accumulating debt? Remove all credit cards from your wallet, and leave them at home when you go shopping, advises former contributor Sabah Karimi. “Even if you earn cash back or other rewards with credit card purchases, stop spending with your credit cards until you have your finances under control,” she writes.
Put Work Bonuses Toward Debt
If you receive a job bonus around the holidays or during the year, allocate that money toward your debt payoff plan. “Avoid the temptation to spend that bonus on a vacation or other luxury purchase,” Karimi writes. It’s more important to fix your financial situation than own the latest designer bag.
Delete Credit Card Information From Online Stores
If you do a lot of online shopping at one retailer, you may have stored your credit card information on the site to make the checkout process easier. But that also makes it easier to charge items you don’t need. So clear that information. “If you’re paying for a recurring service, use a debit card issued from a major credit card service linked to your checking account,” Hamm writes.
Sell Unwanted Gifts and Household Items
Have any birthday gifts or an old wedding presents collecting dust in your closet? Search your home for items you can sell on eBay or Craigslist. “Do some research to make sure you list these items at a fair and reasonable price,” Karimi writes. “Take quality photos, and write an attention-grabbing headline and description to sell the item as quickly as possible.” Any profits from sales should go toward your debt.
“Your daily habits and routines are the reason you got into this mess,” Hamm writes. “Spend some time thinking about how you spend money each day, each week and each month.” Do you really need your daily latte? Can you bring your lunch to work instead of buying it four times a week? Ask yourself: What can I change without sacrificing my lifestyle too much?
Reward Yourself When You Reach Milestones
You won’t pay down your debt any faster if you view it as a form of punishment. So reward yourself when you reach debt payoff goals. “The only way to completely pay off your credit card debt is to keep at it, and to do that, you must keep yourself motivated,” Bakke writes. Just make sure to reward yourself within reason. For example, instead of a weeklong vacation, plan a weekend camping trip. “If you aim to reduce your credit card debt from $10,000 to $5,000 in two months,” Bakke writes, “give yourself more than a pat on the back when you do it.”