Do you feel like you are dealing with debt and not sure what to do next? Don’t worry, you’re not alone. According to a report by The Pew Charitable Trusts, eight out of ten Americans have some form of debt.
Debt repayment can often feel difficult and overwhelming, but there are easy ways you can pay off debt. If you’re looking for actionable debt advice and want to learn how to get out of debt, use the following tips to help you ditch debt for good.
1. Go on a cash diet
When you’re working to get out of debt, you may want to consider going on an all cash diet for a period of time to get your spending under control. Using credit and even debit cards make it easy to spend more without really thinking.
On the other hand, by using cash, you can have a physical reminder of how much you are spending each month. Consider using only cash and taking out a certain amount each month for your expenses. So let’s say you have $100 budgeted for fun … once you’ve spent $100, you’re done. It can be easier to avoid additional debt by opting for cash and you can take out only what you budgeted for.
2. Cut out subscriptions you no longer use
One of the first steps you should take when working to get out of debt is to track all of your expenses. It’s key to understand where every penny is going. Once you see where everything is going, look for any unused subscriptions that may be lingering in your budget.
Are you subscribed to magazines that you don’t really need? Do you have a gym membership, but never seem to get around to it? Look for any hidden budget busters and cut out subscriptions that you no longer use or need. Take the savings and apply it to debt.
3. Make biweekly payments
One easy way you can make progress on your debt repayment is by making biweekly payments instead of monthly payments. Take your monthly payment and divide it in half — and make equal payments biweekly. By making biweekly payments, you can cut down on interest and also make an additional payment without any extra effort. When you make monthly payments, you’ll have 12 total payments at the end of the year. When you cut your payments in half and pay biweekly, you end up making 26 half payments, which equates to 13 total payments.
4. Turn your stuff into cash
Cutting back your expenses is just one way you can get out of debt, but you can also focus on earning more, too. Take a look around and see if you can turn any of your stuff into cash. Do you have old books and CDs you can sell? Any items you no longer use or need?
You can use this as an opportunity to declutter your house, free up some space and make some extra cash. Consider selling your items on Craigslist or utilizing Facebook to let people know what items you have for sale. You may also be able to get cash for your used items at local stores. I’ve made over $200 in the past year by decluttering and getting rid of my old books, CDs and DVDs.
5. Pay off high interest debt first
When it comes to paying off debt, you may wonder if you should pay off the smallest balances first or the debt with the highest interest first. While paying off the smallest balance first can be good for motivation, paying off high interest debt first will help you save money, effectively freeing up more cash for your principal balance.
Start by listing out all of your balances as well as your interest rates. Then decide to focus on paying off the loan with the highest interest first, while paying the minimum on the rest. This method is typically called the Debt Avalanche method and can help save you money on interest and get you out of debt faster.
6. Adjust your tax withholding
When tax season hits, do you typically get a refund? If so, you may want to adjust your tax withholding. Why? When you get a refund, it means you’ve been paying too much in taxes. And let’s be honest — when we get a lump sum of money, it can be hard to do the right thing. Why not boost your paycheck now and put more toward debt by adjusting your tax withholding? Of course, do what is right for your situation and if you have any questions, discuss with a tax specialist.
But making this simple shift can mean giving yourself a raise all year, instead of a one-time lump payment. Imagine how much a little extra money can save you on interest. You can get out of debt that much faster and use the money to save and invest instead.
Final word
Learning how to get out of debt and making significant progress on your debt repayment can be a long journey, but with consistency and commitment, it is possible to get out of debt.
If you’re saddled with student loan debt, look into refinancing options. It might help you lower your interest and lower your overall monthly payment.
So, if you’re wondering how to get out of debt and need some actionable debt advice, use these six tips. Starting small can help you build motivation and momentum to keep you going in the long run, so eventually you can say goodbye to debt.
Written by Melanie Lockert
