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When you have a lot of debt, it can feel like you’ll never pay it all off. While it may feel like too much to handle, with some planning and sticking to your goals, you can get your debt paid off no matter how much you have — at any age.
Here are some tips to help you get started.
1. Start with a budget
This sounds basic, doesn’t it? But chances are that you don’t have a budget — or if you do, it’s not written down.
There are plenty of apps that can help you with this or you can do it yourself in an Excel spreadsheet or just pen, paper and a calculator. Start by adding your total household income each month as precisely as possible, then list out your expenses, including bills, groceries and entertainment. This will help you get a good idea of your current financial situation, where you can cut costs and how to best plan for paying off your debt.
2. Stop accumulating debt
If you want to really make a dent in your debt, stop adding to it. Remove your credit cards from your wallet and leave them at home. Remove your credit card information from online shopping sites. If you need something, stick to your budget. If it’s not in your budget immediately, try to save the money over a few months rather than put it on a credit card.
3. Put your debts in order
Now that you have a budget and aren’t accumulating debt, you can start to plan how to pay your debt down. There are two ways to organize your debt: from lowest amount to highest amount and from highest interest rate to lowest interest rate.
It’s up to you which way you choose. Paying off your smallest debts first (method #1) will help you feel more successful in your debt reduction. However, paying off the debt that has the highest interest rate first (method #2) will result in you paying less money overall to pay off your debt.
If you need early success to stay focused on paying off debt, go with method #1. Otherwise, method #2 might be the best for you.
4. Don’t just make the minimum payment
When you’re paying off a lot of debt, making the minimum payment will only make a small dent every month. For the first debt that you are paying off, put as much money toward that as possible without breaking your budget. Try to pay up to double the minimum payment, if not more. Then, once that debt is paid off, use that money to pay off the next debt in your order.
5. Look into balance transfers or debt consolidation loans
If your credit is good, you might qualify for a new credit card with a lower interest rate that you can transfer the balances of other credit cards to for a small fee (or sometimes free). This can be a great way to pay off your debt faster. You may also want to consider a debt consolidation loan from your bank or credit union so that you can get a better interest rate and reduce how many places you’re making payments to each month.
6. Reward yourself when you hit small goals on your way to the big goal
Want to stay focused on reaching your goals when it comes to paying off debt? Set small goals and reward yourself for reaching them. However, you want to make sure your rewards don’t mean more debt. Give yourself a small splurge on a new outfit or plan a weekend getaway that won’t break your budget. Getting the reward will give you something more fun to look forward to than paying off debt while also showing you that you can still have a good time on a budget.
7. When you pay off your debt, keep it paid off!
Finally paying off that last bit of debt can make you feel free, but you don’t want to lull yourself into a false sense of security. That could result in getting back to where you started on this journey — or worse! Instead, keep your debt to a minimum. Use one credit card at a time for major expenses, and pay it off before you put something else on it. Stick to that budget you created in step one as much as possible, and you’ll experience a lot less financial stress.
Do you have questions about paying off debt or maintaining your independence at any age? Get answers from local experts by calling REAL Services at 574-233-8205 or toll-free at 800-552-2916.
REAL Services is proudly supported by Home Comfort Experts. All In For Alzheimer’s.