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5 Tips for Paying Off Debt

5 Tips for Paying Off Debt

Ready to start paying off your debt? Here are 5 ways you can quickly tackle your debt issue and take your first real steps towards becoming debt-free.

 

Create a budget

The first step in solving your debt is to create a budget for yourself. Make your own Excel spreadsheet, or use a personal finance application like Mint that includes your monthly income and expenses. Once a budget is established, it’s easier to break down your cash inflows and outflows and see where you can cut costs.

 

Cut back on your credit card spending

The easiest way to stop accumulating debt is to remove all credit cards from your wallet and leave them at home – especially when out shopping. Even if your credit cards earn you cash back or other rewards with purchases, stop spending with your credit cards until you have your debt issue under control.

 

Pay off your biggest loans first

You need to prioritize your debts. Sort your debt’s interest rates from highest to lowest, and then start with the debt with the highest interest rate first. By paying off the debt with the highest interest rate first, you increase the amount you pay on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your debts.

 

Put holiday bonuses towards paying off your debt

This is probably the last thing you’d instinctively like to do with your holiday bonus, but it can be an extremely effective way of paying down a large chunk of your debt. If your job offers you bonuses around the holidays, allocate that money toward paying off your loans. It’s more important to fix your financial situation than spending your bonus on a vacation or other luxury purchases.

 

Pay more than the minimum balance

In order to effectively make a dent in your debt, you need to be paying more than just the minimum balance required each month. If you’re able to afford it (and it’s within your budget), start paying more than just your minimum balance and you’ll take care of your debt issue a lot quicker.