You’ve finally seen the light — you realize that debt has made a slave of you, and you’re ready to start fighting your way back to freedom. But with such large, intimidating balances staring you in the face, how do you possible begin to chip away at them?
Many people find themselves trying to pay off debt at some point or another in life. It can feel like a monumental task, especially if you owe tens of thousands (or even hundreds of thousands) of dollars to various lenders. Making minimum payments is no way to go — it will take many years to get out of debt if you go that slowly. If you want to get out of debt quickly, within the course of a few years, you’re going to need to take control of your life and takes some drastic steps.
Assuming that you’ve already stopped borrowing money, freedom from debt is within reach. These five tips will help you reach that victory more quickly.
1) Make a budget and stick to it.
Many people get into debt somewhat unintentionally — they don’t keep track of their income or their spending, and slowly end up spending more than they make every month. They use credit cards or other consumer debt products to make up the shortfall. After a few years, this kind of practice leaves them with thousands of dollars in debt that they never intended to have.
The solution to this is to make a budget — a detailed plan that accounts for all of the money that comes into your household every month and then allocates all of those funds to pay for your life expenses. When properly done, budgets are comprehensive plans for your money, and they can show you exactly how much money you can afford to use to pay down debts each month. Budgets also show you if there are lifestyle areas that you can trim in order to speed up your debt pay-off.
2) Grow your income.
It’s simple math: The bigger your income, the more ammunition you have in your fight against debt every month. So if you want to get out of debt quickly, it’s worth taking some time to think if there are ways to grow the income that you get from your primary job. Are you working at your full potential, or languishing in a job that doesn’t take advantage of all your skills and training? Changing jobs or careers is a lot of work, but it can be worthwhile if it comes with a big bump in pay. And you may not have to change jobs to grow your income. Ask for a raise, volunteer for overtime or take on additional assignments and responsibilities that come with extra pay. If you’re in the midst of a fierce fight with debt, you need to do whatever it takes to win.
3) Get a second job.
This is perhaps the most difficult tip to follow through on, but it can also make the biggest difference: If you’re in a deep debt hole and have a limited income at your main job, you may need to get a second job in order to have more money to pay your debts. You can wait tables, take on side projects, mow lawns, babysit, clean houses, be a security guard or find any of a host of other flexible, hourly jobs. You probably won’t make as much at this work as you do in your regular job, but even a few hundred dollars a month will go a long way to getting you out of debt quickly. Yes, this is going to eat into your downtime, your nights and weekends, and your time with your family. But making these small sacrifices in the short term will help you achieve long-term freedom.
4) Break bad habits.
Our bad habits and vices are often the most expensive discretionary items in our lives. Some of these are obvious — smoking, drinking, gambling, etc. — while others are less obvious. If you have a habit of going out for lunch every day, or swinging through the Starbucks drive-through for a fancy coffee drink every morning, those lifestyle choices are just as expensive as the more obvious vices. Whatever your habit, decide to break it now. It will likely save you hundreds or thousands of dollars a year, money that you can apply directly to your debt pay-off.
5) Sell stuff and downgrade.
Sometimes the things that get us into bad financial situations are life’s big purchases — things like cars and houses. If you bought more house than you could really afford, your big mortgage payment may be putting too much pressure on your budget. And if you bought a new car on credit, the loan on that car may represent a large chunk of your debt load. If you’re really radical about getting out of debt, you need to consider selling those too-expensive items and getting out from under the burden of them. Sell the car, pay off the loan, and buy an inexpensive vehicle with cash. Sell the house and buy a smaller home in a less prestigious neighborhood so that your mortgage payment is lower. You can always upgrade your home or car once you get out of debt. For now, though, these things are only holding you back.
Getting out of debt may be one of the biggest struggles you ever walk through in life. If you sacrifice and persevere, though, it can also be one of the biggest victories you ever win.
Photo by Casey Konstantin. Used under Creative Commons License.