You go to buy a car and get slapped with a denial. Apparently, your credit score is too low for any bank to be willing to give you a loan. When the vehicle salesman tells you this, your mind flashes back to all the credit cards you’ve maxed out.
Now that you think about it, you don’t blame the banks. If you want that shiny new ride, you’re going to need to learn how to get rid of debt. The idea of going down that spending hole may have you shivering in your boots.
Take a deep breath. Saving money and paying off bills isn’t as painful as it may seem.
In fact, with the right spending habits, you’ll have things cleared up in no time. Keep reading to learn more about kicking your debt to the curb for good.
Create a Plan of Attack
The first step of fixing any bad situation is acceptance. As soon as you tell yourself that you’re in the wrong for maxing out as many credit cards as you have, you can begin to make changes.
Sit down and make a list of everything that you owe. From there, pick up a calculator and begin adding up how much you would have to make each month to start picking away at your debt.
You may have to pick up a side job or sell something, and that’s okay. It’s better than not being able to get a house later because of a low credit score.
Laying all your debts out there on the table like this can also help you figure out which problem you should knock out first. You could start with the one with the highest interest rate or with the one you owe the least on. Both are good options.
Get a Budget Together
Now that you have a plan in motion, you can start thinking about how you’re going to carry it out. This is what the budgeting process is for.
Sit down and figure up how much you spend on bills and groceries each month. The money that’s leftover after that is your budget. You can use that cash to spend on yourself, or in this case, throw it at your debt.
Once you have this budget together, don’t go outside it. It’s easy to tell yourself that you’ll add to the credit card next month, and then next month never comes.
If your children want something, let them know that you’re saving money. If friends want to go out to eat, tell them no. That’s a word that you’re going to have to get used to using a lot if you want to stick to your guns.
Pay More If You Can
Every credit card company has a minimum amount that they want you to spend every month. You don’t have to stick to this minimum. If you have the cash and you want to go ahead and pay off the entire thing, go for it!
Doing it this way will help you get rid of the debt faster, and you’ll lower your interest rate as well. This tactic doesn’t only end with credit cards. It works for student loans and other debts too.
Make a Few Lifestyle Changes
If you ask anyone how to get out of debt, this is going to be their top answer. Make a few lifestyle changes so you have more money to throw at your loans. For the most part, they’re right.
There’s no shame in getting clothes from a thrift store. You might have to do some browsing before you hit a goldmine, but you can find some cheap brand-name stuff there for pennies.
We understand that after a long day of work, the last thing you want to do is come home and cook, but DoorDash and GrubHub aren’t the answer. Ordering out multiple times each week is expensive. It really takes a good chunk of the money that you could have used on your debt.
Going to the coffee shop each morning does count in the “no eating out rule.” That 5 dollars you spend every morning on your mocha adds up in the long run. Make coffee at home and bring it in a to-go cup.
Everyone likes staying in shape, but you don’t need a gym to do it. You can also stay on top of your fitness by going on a jog each morning. These are only a few examples of how you can save.
Get a Credit Report
Some people like to start with the debt that’s dragging their credit report down the most. The thing is, it can be hard to figure this out. If you’re scratching your head, you’ll be happy to know that you can look at your report for free.
Not only will it show you where you stand, but you’ll also be able to see what’s holding you back. Things that are in the red, need to go ASAP.
While you’re here, you should make sure that your report is accurate. Someone could be taking your identity and running wild with it. If this is the case, you’ll have the opportunity to dispute the debt and possibly have it removed!
Use the Snowball Method
If you don’t have debt with a huge interest rate, you can try out the snowball method for paying off your loans. What you do is you pay the minimum amount on all your debts and then throw the rest of your budget at the smallest one.
Once you have that paid off, you’ll move on to the next largest debt on your list. This allows you to hard focus on one target, which provides a lot more motivation. If you’re trying to concentrate on more than one debt at once, you’re likely to give up because you don’t feel like you’re going anywhere.
Again, don’t try this with a loan that has a large interest rate. Those need to be paid off as soon as you can. You can’t afford the slow creep that comes with the snowball method.
Pay in Cash
Most people pay with a card nowadays, which is fine. They feel like that’s safer than carrying a huge wad of cash on them at all times.
However, if you’re in a huge amount of debt, you should consider ditching your cards to only use physical money. When you can feel your cash slipping through your fingers, you’re less likely to overspend.
Stop Investing for the Time Being
Pump the breaks on all your investments until you get your debts paid off. This includes your retirement fund. You don’t want your loans following you into your golden years anyway.
Once you’ve tackled your debts, you can go back into paying into your 401k. For now, hold off.
Stop Borrowing Cash
When your back is against the wall, it can be tempting to take out another loan to handle your current debt. This is only putting you further down a rabbit hole with one of the different kinds of debt.
Stop borrowing money so you can focus on what you owe. Shred your current credit cards and don’t get any more. You can pay in cash for the time being.
Don’t Fall Into the Consolidation Trap
If you have a bunch of debts you can consolidate all of them together. You’ll now have the chance to pay them all off at once, and you’ll lower your interest rate. Sounds like a plan, right?
Maybe. You should consider a debt consolidation loan from Plenti but do so carefully. There are plenty of benefits of going this route, but you could also mess yourself up. It puts you in a false sense of security.
When you see the balance on four of your five loans drop down to 0, you’ll start to relax. The problem is, the debt hasn’t gone away. It’s only moved to a new source.
You’ll still have to use the other tips on this list to take care of your new loan mountain. If you don’t make these changes, there was no point in consolidating.
Some debt consolidations do come with fees that you have to consider as well, and if you miss a single payment, it could set you back big time. It’s not for the faint of heart, but it’s doable with the right attitude.
How to Get Rid of Debt for Good
Without a good credit score, it will be hard for you to make big life-changing purchases like getting a car or a house. You’re going to need to learn how to get rid of debt if you want to move forward.
This sounds like a big deal until you get started chipping away at some of the causes of debt. As soon as you pay off the first loan, you’ll see how easy it can be.
Are you looking for more money tips that will keep you on track of your debt? Check out our blog daily for all the latest tips and tricks.