Learn How to Pay Off That Debt

Having debt can feel overwhelming, as the longer you don’t take care of it, the more stress and weight you’ll feel on your shoulders. The bad news is that the emotional toll can manifest into a physical toll. Some people prefer the head-in-the-sand approach (yikes), but not you since you’re reading this article! 

The good news is that there are proven strategies to help you regain control so you don’t feel like you’re spiraling further. Don’t feel like you’re alone in this.  

Whether it’s credit card debt, student loans, auto debt, or any other type of debt, no matter the amount, it’s essential to create a clear plan to tackle it. We’ll review some strategies and tips to help you get back on track using proven methods.

1. Understand Your Debt First

Before working on your debt, you need to understand what they are. 

• List down every debt you owe, including the amount, interest rate, and minimum monthly payment. You can do this on Google Sheets or any spreadsheet to keep track.
• Note down any due dates and penalties for missed payments.
• Check your credit score to see how your debt impacts it.

This will give you a starting point to determine which debt you want to handle first.

2. Choose a Debt Payoff Strategy

Choose between two popular debt payoff methods:

Debt Snowball: This strategy focuses on paying off the smallest balances first while making minimum payments on the rest. Pay off the smallest debt, then move on to the next smallest debt, “snowballing” as you go. This method helps motivate you because paying smaller balances offers easier “wins.” 

Debt Avalanche: This strategy focuses on first paying off the balances with the highest interest rate. This helps you save MORE money in the long run (due to paying less interest), but it can take longer to achieve your first “win.”

Which method can keep you more motivated? Pick one to start!

3. Create a Realistic Budget

Now that you understand HOW much debt you have, it’s time to create a solid budget to help you figure out WHERE your money is going and how much you can reserve on the side to pay off debt.

• Figure out what your needs vs wants are
• Use budgeting tools to help you see the big picture
• Set a specific monthly amount to put toward debt payments

This budget is your game plan, and you’ll need to stick with it for it to work. If you need extra guidance, we’ve included more budgeting tips here!

4. Consider Debt Consolidation

If you have too many high-interest debts, consolidating might make the repayment process easier. For instance, if you have credit card debt, you can roll your debts onto a balance transfer credit card that charges no interest during the promotional period. This typically requires borrowers to have a good credit score and can pay off their debt in under 2 years.

Another instance is applying for a debt consolidation loan (a type of personal loan), potentially allowing borrowers with imperfect credit to get lower interest rates than their current credit cards. 

While consolidation can simplify payments and reduce interest costs, be sure to read into the fine print to avoid taking on more debt. You have to know you’ll keep your credit spending in check!

5. Explore Credit Counseling If Needed

If your debt feels completely overwhelming, you might want professional help. Credit counseling agencies can help create a debt management plan, and you can look into NFCC (Non-Profit Credit Counseling) or the FCAA (Financial Counseling Association of America) to get started. These are nonprofit and reputable organizations if you decide to go this route!

6. Build Healthy Financial Habits

Getting OUT of debt is only one part of the journey, so you’ll need to foster healthy habits for long-term financial health. You don’t want to get back in debt after all that hard work!

• Build an emergency fund that covers at least 6 months of expenses (calculate what your essential spending is in a month to get your base number)
• Automate savings and bill payments so you don’t get charged late fees (but still check your statements to make sure there are no mistakes)
• Only use your credit card when you know you can pay it back
• Learn how to celebrate something without going overboard on splurging (you don’t always need an “I deserve this” purchase; review your budget on needs vs wants!)

These mindset changes can add up to significant financial improvements over time.

7. Stay Motivated & Track Your Progress

We talk about how investing is a marathon and not a sprint, and the same applies to paying off debt. Here’s how to keep motivated:

• Track your balances monthly (hopefully it goes down)
• Celebrate paid-off accounts (not by spending but by doing something free and fun!)
• Keep yourself accountable by telling supportive friends and family

You can try Debt PayOff Planner (free version) to help you track your progress if you prefer an app to take it on the go. Otherwise, use Google Sheets and look for templates to help!

The Money Move

It may feel hard now, but paying off debt takes time, consistency, and, most importantly, your commitment! You can achieve this with a clear plan, using the tips above, and making smarter financial choices. Just remember it’s a marathon and not a sprint. 

Once you’ve committed and made these changes we’ve discussed, you’ll be on your way to debt-free living. You’ve got this, so start today!