9 Useful Tips On How To Get Out of Debt Quickly
Are you or someone in your household in debt? If so, you're not alone.
In 2018, it was estimated that the average American household had wracked up over $137,000 in debt. When you consider that the average annual income for the same household is just over $60,000, you start to see the gravity of the problem.
However, we've put together several ways how to get out of debt quickly to help you get more financially stable and secure.
Start the 50/30/20 Budget
This budget is a straightforward technique that can help you pay down your debt. First, figure out your monthly income after taxes. When you do, take 50% of your total and earmark it for essentials like bills, groceries, insurance, childcare, transportation, and minimum monthly payments.
Next, take 30% of your remaining amount and earmark it for things you want like dining out, entertainment, and travel. The final 20% will go toward your savings and repaying your debt. Throw your extra 20% at your smallest debt first and work your way up as you pay it off.
See Also: How to Budget Using the 50/20/30 Rule
Reduce Recurring Subscriptions
Chances are, you most likely have a few reoccurring subscriptions each month. You may have even forgotten about some and have no idea how much you're spending on them. Even with a $10-subscription, the total can add up quickly.
The Trim app can help negotiate lower monthly bills, let you see exactly where your money goes and search for any subscriptions. If you find ones you don't use, it'll cancel them for you. You can then take this extra money and add it to your repay your debts.
Take up a Freelance Job
The beauty of a freelance job is that you can do it on your own time. It works around your schedule and how much you make is entirely up to how much you want to work.
Content sites like Textbroker or Getacopywriter pay you for writing articles. Clickworker will pay you between $0.25 and $0.75 to perform short tasks and surveys. Amazon's Mechanical Turk will pay you for jobs ranging from transcription to translations to product description.
However, these sites don't take taxes out of your earnings, so be aware of this and set aside a percentage each week to cover it when tax time comes. You can split anything you earn and put half savings and half toward paying down your debt.
Consider Debt Consolidation
Taking out a larger debt consolidation loan is one way to get rid of a lot of your smaller payments and combine them into one payment. Debt consolidation loans come from your bank or lender.
You apply, get a good interest rate, and use the money from the loan to pay off things like credit card balances, student loans, and miscellaneous fees. You won't have to worry about paying off several small payments each month. You'll just pay your loan payment and save money on interest costs.
Use the Debt Snowball Process
Start by making a list of all of your debts with their balances arranged from smallest to largest. Each month, make the minimum payment on every debt but the smallest balance.
Take any extra money you have or the additional money you would pay on the larger debts and pay your smallest one. When you pay it off, move onto the next one and repeat this process until it snowballs. Eventually, you'll have no debt left.
Build an Emergency Fund
Yes, it sounds crazy to add money to a fund that you don't touch when you're trying to get out of debt. But, really think about it.
If you had an emergency with your pet or kid, would you be able to handle an additional $500 to $1,000 bill without incurring more debt? The answer is usually no.
Having at least $1,000 in an emergency fund can help save you in unexpected situations and prevent further debt.
See Also: 5 Financial Emergencies Everyone Must Be Prepared For
Start Using Coupons
Coupons are one way that a lot of people don't think to save money. However, you have access to thousands of digital coupons and coupon-specific apps that could help trim down your grocery or household expenses.
It may take a while to get it down to a science. However, you can take the money you save from couponing and put it toward your debt. Any little bit helps when it comes to debt, and you get better at it with practice.
Limit Your Credit Card Use
If you don't change your spending habits and you continue to use your credit cards, you're not going to get out of debt. Switch to paying in cash as much as you can. You're able to actually see where your money is going each time you spend it. Additionally, this can also make you more hesitant to buy items you really don't need.
Sell Your Clothing or Items Online
It's the digital age. This means that you can quickly and easily make additional money from selling your clothing or household items that you don't use anymore. There are most likely a lot of items in your closet that you'll never wear.
Why leave them to collect dust?
Craigslist, LetGo, Facebook Marketplace, Poshmark, Shopify, and Thredup are all online merchants that connect you with people who want your clothing or items. A lot of them are free to use too!
These nine tips on how to get out of debt quickly will help you reduce your overall debt amounts and get out of debt quicker. It does require a little patience and dedication on your part. However, being debt-free is well worth cutting back on your expenses for a few years.
