Presently US economy is hit hard with the current Debt situation. Average US citizen carries $ 6,194 in Credit Card debt according to the 2019 Experian Consumer Credit Review which Alaskans have the highest credit card balance, on average $8,026. Also as per Investopedia, The Congressional Budget Office estimates that the U.S. federal debt held by the public will reach 98.2% of GDP, or $20.3 trillion, by the end of 2020 which is a serious situation. This could create economic instability and may result in unemployment and other social issues.
As per Pew Research study, half of the Americans spend more than they earn and uses specially Credit Cards to bridge the gap of their expenses. This is where the problems starts to happen and people naturally traps with exorbitant debt which is sometimes hard to come out. This creates humongous pressure on their daily activities which could lead up to social issues such as family issues, depression and it will kill the innovative mindsets.
Disasters such as Covid-19 outbreak had really hit hard in the public who are very much hit with the debt trap if they face sudden salary cuts or loss of employment. People who are in contract employment are most vulnerable as employers could decide to cut down staff as their revenues are declined to the outbreak.
Therefore, it is extremely wise to look at the ways and means and strategizing how to come out of debt and become a debt free person with the limited possible time frame. Below is looked at 10 simple but strong approaches which could be used to overcome the debt challenge.
Simple ways which will help you to be debt free
- Plan to pay more than the minimum payment
This is a very effective way to reduce your debt faster. Assume you carry a credit card with $ 18,000 balance and with 16% APR and the monthly minimum payment of $ 720, you need to pay 173 months which is more than 14 years to pay off the credit card debt. After 14 years you have ended of paying more than $ 8,800 as the interest which becomes a huge amount. This also if you don’t add anything new for the card balance which will obviously be challenging.
Irrespective of whether you are carrying a Credit Card balance, personal or student loan or a mortgage, the best way to pay them off sooner is to pay more than the minimum monthly payment. You can plan to find the additional money to pay more than the monthly payment. This will help immensely for you to save the interest and complete the repayment faster. You need to keep in mind to check out whether there are any penalties implies for early settlements before entering for the loan.
- Use Debt Snow Ball Method to clear your debt faster
If you passionate and created the momentum of clearing your balance debt by paying more than the minimum monthly commitment, you are in the right track of achieving better results.
While doing this, you also can list down all your loans and credit card commitments and list down from least to the highest payment commitments. Consequently you can think of putting your extra dollars towards paying off your smallest balancers and move to the next until you complete paying one by one and so on.
This method which is described as “Snow Ball Method” will help you to clear your smallest debt faster and move towards clearing your larger debt by throwing your extras in your hand. Ultimately you will achieve a psychological advantage seeing the disappearing of smaller debt which will ultimately you will have both mental courage and monetary strength towards settling larger debt faster.
- Think of side earners
If you are determined to try Snow Ball method by clearing your debt faster, it is essential to think of planning to earn few extra money which will add positivity for your month end earnings. Nowadays so many opportunities available by freelancing in portals such as freelancer.com or upwork.com which you can sign up easily and start building your profile towards getting bigger projects according to your area of expertise.
Also you can think of starting your own part time online business, bakery business with delivery, elderly care, baby sitting or online content development to speed up towards earning some extra income. This money is helpful towards paying your loans faster.
- Consolidate your loans
Have you got numerous loans including different credit card balances? Is it touch managing them separately with your earnings? You can consolidate all these loans into one and agree with the bank for the best interest rate for repayment. This will help you to clear high interest rate loans and especially credit card balances. Also this method will help you to manage your expense channels properly as you will not have multiple payments in different time cycles in every month.
You need to keep in mind when you negotiate for the new consolidated loan, to agree for a lesser interest rate and to minimize the early settlement charges.
- Create a restricted budget
If you want to pay off your debt faster, then moving with restricted minimum spending budgets will contribute towards saving cash every month which you can use to pay your debt faster or it will help to try the snow ball method effectively.
This approach will be different with each one and depends on their lifestyles and how much you earn as monthly wages. You can cut down eating outside, buying daily essentials from expensive super markets, limiting your entertaining budgets which will ultimately result in lot of savings.
Keep in mind that you don’t have to go on restricted budgets for ever and can determine the time period with the amount of debt you have. But remember, it is always would be better to cut down your unnecessary spending which will you to use that money for a good cause.
- Cut away expensive life style habits
Temptations are the biggest causes for spend more and to create high billed lifestyles which will steep your debt challenges. First you need to understand the things you spend heavily in your daily routine and see what to needs to change. Assume if you heavy smoker or a drinker, then obviously you will be wasting lot of money. So best thing is to quite from these habits.
If you have a habits of going for the most expensive restaurant frequently for meals with your friends, it is wise to think of cutting these visits off and probably invite them to your house which you can prepare some meals and enjoy with them.
Try looking for discounted sales for purchasing online as this could save to purchase your desires items less than 50% which will save lot of your money.
- Use extra money to pay off debt
Very year, people tend to get some additional money such as bonuses, incentives or you might inherit some family money. Whatever the way, if you found some money you can wisely allocate a proportionately some funds to pay off your debt with some bulk sum.
If you concentrate on the snowball method, you can allocate your extra dollars to pay the smallest balances first. Remember, you need to decide how much you are going to allocate from this extra money to pay off your debts as you need to keep some savings for yourself as cash for emergency usage.
- Sell the items which are not needed
If you are looking for some quick cash to be used for ease out on your debt, selling the inventory you have will be a quick and a faster way to gain some funds. You can select these unwanted items and may be make these bit attractive if they have become rusty, and you may do a Garage Sale attracting your neighborhood to but these items. Or else you can use online channels to list down these items and make online sales. This will help to generate some additional dollars fast and also it will clear your space at home.
- Limit your vehicle needs
In case your own family has two vehicles, try using a single cost effective vehicle and then either use alternative commuting methods by taking transit, or automobile pool. This will actually help to save your self-hundreds of dollars a year through most effective the use of one car. The average vehicle proprietor spends over $9,000 in line with 12 months to own and function their automobile. If you use this cash to pay down your debt, it’ll make a massive difference.
- Stay away from temptations
Temptations are extremely dangerous unconscious ways to destroy your heard earned wealth and make your debt person. If you are person who like to purchase lot of fancy items online using your credit cards, it will add up your credit card balance more than your monthly earnings.
This is the danger of using Credit Cards for these kinds of non-essential purchases which will slip your monthly budgets and build up your sky rocketing debt.
If you have already done these purchases for a longer period, then you need to see what is the best method to clear these debt as discussed earlier and you need to control your habits for your own good.
Remember, we are now in a time where the economies badly effected with the Covid-19 pandemic which could adversely affect your careers and monthly earnings. So it is always advisable to free your debt faster and have savings in your bank which you can use for emergency.
