Finding yourself in a pool of debt can severely restrict your choices as well as wreak emotional havoc on your psyche. Borrowing money to pay already existing debt can lead to all sorts of problems that have nothing to do with accounting and everything to do with psychology.
That means, you undoubtedly encounter situations like stress, debt denial, anger, fear and panic. The list goes on.
It is important to understand what situations lead you to debt first. Anything owed to someone else is considered debt. Debt includes student loans, car loans, credit cards, medical debt, and so on. Taking a loan comes at a cost, which when underestimated, can land you in debt.
This is a major disadvantage that comes along with taking multiple loans.
No one wants to be in the situation above, but there must be a way out of this. And you are just in the right place if you’re finding answers to how you can make yourself debt-free.
So here it goes. 13 hacks to pay off debt.
- 1 1. Create a budget:
- 2 2. Pay More Than the Minimum Balance:
- 3 3. Cash payments> credit cards.
- 4 4) Sell unwanted stuff
- 5 5) Pay off debt with balance transfers:
- 6 6) Get a second job:
- 7 7) Start a business
- 8 8) For now, do not live life king size
- 9 9) Reward yourself after every achievement
- 10 10) Dave Ramsey’s snowball method:
- 11 11) Use shopping portals that pay you back for every purchase:
- 12 12) Learn From Others
- 13 13) Pay Off Debt With Bankruptcy
- 14 1) Debt consolidation
- 15 2) Debt settlement
- 16 3) Home equity loans
- 17 To conclude
1. Create a budget:
Make a list of all your monthly costs, and arrange them in order of priority. Scrutinize your budget and see which items are unnecessary, given the amount of debt you’re in. For the time being, spend on only that which is necessary. If you don’t utilise your money now, your debt only increases further.
2. Pay More Than the Minimum Balance:
A good strategy would be to pay off debt little by little, maybe a fraction of your income every week. Maybe you pay 3% of the outstanding balance per week or per month. That’s fair enough, however, you cannot anticipate to be out of debt very soon that way. Try increasing that percentage gradually, so that you are able to come out of debt faster.
3. Cash payments> credit cards.
Spending using cash makes spending seem more of a guilt, compared to spending with credit cards. You cannot get the same control over your expenditure you get using cash. That’s more of a mind game, and a hack you should definitely use when trying to adopt self-control over your spendings.
4) Sell unwanted stuff
Clear your wardrobe, book shelf and store room. But this time, instead of throwing away what you don’t need anymore, try selling it. Use all of that money for paying off debt.
5) Pay off debt with balance transfers:
If you have an account with a high interest rate, you can transfer its balance to a card with a lower interest rate — and therefore spend less in interest over time. This is like paying off debt on one credit card using another card.
6) Get a second job:
Try getting a part time job, for example, doing surveys online, viewing advertisements, etc. This may sound unrealistically good, but it’s true. And they aren’t time consuming jobs at all. Try getting a job at a nearby cafe incase you need a little more money.
7) Start a business
Now is the time when you have to utilise your abilities and provide services on that basis. In other words, if you’re good at expressing yourself, start writing a blog. If you’re a decent artist, draw diagrams for your biology mates.
If you like kids, and have a certain level of qualification, offer tuition for students. It’s suggested to offer services, but if you think you are more capable of providing tangible goods for business, do that.
8) For now, do not live life king size
Share an apartment. Paying a full fledged rent can be a colossal expense. Let that burden be distributed. Compromise on your space for the time being.
9) Reward yourself after every achievement
Using the idea of positive reinforcement in order to encourage yourself to speed up the process of debt clearance is a remarkable hack. But provided, the rewards are affordable and cheap.
10) Dave Ramsey’s snowball method:
Here’s a high-level overview of how the debt snowball works:
A) List your debts from the smallest to largest balance. List your debts based on the remaining balance.
B) Make minimum payments on all debts except the smallest ones.
C) After you pay off debt (smallest), take the money you were paying on that debt and roll it into the next highest payment. And that gives you a “debt snowball”.
D) Repeat this process until you are done paying off debt.
11) Use shopping portals that pay you back for every purchase:
When you do have to spend your money, look for rewards programs that would pay a fraction of your purchase back.
Go slow, go easy on yourself
Don’t rush to pay off your debts in a week. It’s not a bomb attached to you, ticking every second, and you need to keep in check your mental and physical health too. Keep your stress levels in check, pay off debt slowly, yet steadily.
12) Learn From Others
Talk to others who have been in the same situation, learn from their experiences and take advice whilst also trying to adopt them in practice.
13) Pay Off Debt With Bankruptcy
As a last resort, bankruptcy can offer a fresh start. You should only use it as a last resort, however, because bankruptcy can devastate your credit.
Declaring bankruptcy can be a long, expensive process and you shouldn’t take it lightly.
Fatal hacks, that will not help you clear your debt:
1) Debt consolidation
This is basically a loan that combines all your debts into one single payment. This sounds like a good idea until you discover that the lifespans of your loans extend, meaning you’ll stay in debt longer. Also, the low interest rate that looked so appealing at first usually goes up over time.
2) Debt settlement
Companies in this case charge you a fee and then promise to negotiate with your creditors to reduce what you owe. Usually, they just take your money and leave you responsible for your debt. No, thanks!
3) Home equity loans
Try to never borrow against your home. You risk losing your house if you’re unable to pay back on time.
You don’t need to consolidate, settle or borrow to deal with your debt. You need to change how you engage with your money. Getting out of debt isn’t easy, but with some hustle and creative thinking, you can pay off debt faster.