There seems to be so many conflicting opinions about getting out of debt fast that it’s hard to know which one is the right option for you. Many companies advertise that they offer the best solutions for getting out of debt, but how can you know until you you’ve tried it?
The truth is the best way for getting out of debt fast is the one that works with your unique financial situation in mind. After all, there’s no point in you working on a debt reduction plan that worked for your neighbor. Your income and debt levels are completely different.
It’s important to find the right method that works with your own capabilities in mind. Here are some simple tips that you can apply to your own financial situation for getting out of debt fast.
Reducing debt quickly is about finding ways to get your current balances down as low as possible in the shortest amount of time. This means you will need to have a clear snapshot of what your current debt levels look like today so you can begin to formulate a plan of attack.
When you’re working on debt reduction tactics, it’s important not to keep adding to your balances. Don’t charge new purchases on credit and don’t apply for new credit. You’ll need to be focused on your goal to get out of debt for good, so avoid charging anything new.
Reduce Balances Quickly
Did you know your current credit cards are charged interest on the balance you owe daily, yet the total amount of interest isn’t shown on your account until the end of the month? This means if you can find even a little extra cash from each pay check throughout the month to put toward your debt levels, you’ll be reducing the amount of interest you’re charged each month.
The easiest way to beat the banks at their own interest game is to divide your current monthly payment by 4 and then pay this new amount on the same day every week. You’ll be amazed how much more quickly your balances fall.
Can you afford to put $1 per week out of your current income toward your goal of getting out of debt fast? It doesn’t sound like much, but $1 can have a huge effect on reducing your balances quickly. This is especially true if you break down your current payments into smaller, weekly amounts and then add your small change to the total each week.
For example, if your current monthly payment on an account is $156, divide this figure by 4 and pay the new amount each week. This equals $39 per week and it’s a much easier amount to find out of each pay than waiting a month to find the entire monthly payment. Now add $1 to your new weekly payment and round it up to an even $40.
Your small change might not seem like much, but when you consider the effect of compounding interest, you’re reducing your balance more frequently and paying less interest overall.
Snowball Your Debts
Once you’ve paid off one of your accounts, add the entire amount you were paying off your first debt to the payment you’re making on the next debt in line. This should increase the amount you currently pay significantly, so your next balance will be paid in no time.
Be patient and persist with your goal. If you’re serious about getting out of debt fast, then always remind yourself that it took time to get into debt and it will take time to get out of it too.