Creating a Plan to Pay Off Your Debt

February 27, 2018

Make 2018 the year you get serious about your debt. The longer you put off this problem, the more it will grow. Don’t let compound interest overwhelm you. Follow these simple steps to make a plan and pay off your debt.

List Your Current Debts

The most important step in paying off your debt is understanding how much you owe. Tally up every loan. Include the total balance, annual interest rate and fees you’re paying for late payments. Then decide how you’re going to tackle your debt.

Some personal finance experts recommend paying off the highest-interest loan first so you’re minimizing your interest charges. Others advise you to target the loan with the smallest balance so you stay motivated. However, as Money Under 30 has pointed out, it doesn’t really matter which method you use. As long as you’re consistently working to pay down your debt, the two methods are almost even in the end.

Move Debt Around

If you’ve gotten trapped in a high-interest loan, look for ways to shift that debt to another lender. Talk to your bank or credit union about a personal loan. See if you qualify for a no-interest credit card. You can even check if a title loan from a lender like Headland Lending can offer you a low-interest option. Just make sure you’re borrowing responsibly. You can’t make any progress on your finances if you take a new low-interest card and run up a balance on it.

Consider a Part-Time Job

Are you completely committed to tackling your unwanted debt? Why not pick up a part-time job to help pay down your balance? Now is the best time to join the gig economy, with on-demand companies like Uber and GitHub making it easy to pick up work on your own schedule. You can work on the weekends or a few hours during the week. Even an extra $25 a week can make a big dent in your debt balance.

Cut Unnecessary Spending

Consumer debt is often due to unnecessary spending. A few dollars here and there adds up to a sizeable debt. If you’re serious about getting rid of your debt, it’s time to make a few lifestyle sacrifices. Here are a few ways you can cut expenses:

  • Eating out. Switch to cooking at home.
  • Expensive cable packages. Drop down to Netflix or rent movies from the library.
  • Overpriced cell phone plans. Use a pay-as-you-go plan and maximize savings.

Make a Fun Budget

Personal finance isn’t all about stealing the joy from your life. If you want a sustainable plan for tackling debt, you need to include space for fun purchases. No, this isn’t permission to keep spending $200 a month on cable TV channels you never watch, but it’s a reminder not to get too draconian with your new financial plan. Include one night out per month in your budget, or one new video game or whatever your highest priority fun purchases are. You’ll be more likely to stick to your budget this way.

Remember, millions of other Americans have climbed their way out of the debt trap. If you’re ready to commit, you can do this.

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