Often times, debt can be an easy thing to get into but much more difficult to get out of. Thousands of dollars in debt can be accumulated within months but take years or even decades to pay off. Fortunately, there are many different strategies you can apply to help you take control of, and pay down your debt.
Five Strategies for Debt Management:
Set Achievable Goals
Setting realistic goals and benchmarks to reach during your journey to a debt-free life can be a great way to stay encouraged. While it’s important to understand that paying off your debt can require time and patience, setting and achieving balance-reducing milestones can help keep your morale high.
A debt reduction plan can also help you to visualize the progress you’re making throughout your journey. To take it a step further, consider using a debt thermometer, which lets you fill in your estimated debt-free date and shade the percentage you’ve successfully already paid off.
Become Part of the Gig Economy
If you have the time, the gig economy can give you an opportunity to make some extra money using the skills you already possess. You can dedicate the additional earnings from your side gig to paying off your debt. You might even consider opening a savings account to begin saving for your future while you simultaneously work toward reducing your debt balance.
Consider Alternative Debt Consolidation Methods
Debt Snowball Method
The Debt Snowball Method is widely used to reduce debt. This method is set up to where you pay off your smallest debt first while making minimum payments on all your other balances. Once you pay off your smallest debt you take any excess money and put it toward paying off your second largest debt. This process repeats until you are debt free.
Debt Avalanche Method
If the Debt Snowball Method isn’t right for your financial situation, the Debt Avalanche Method may be a better fit. Unlike the snowball method, your focus will be the debt with the highest interest rate. The idea is to help you pay less in interest over time. While reducing your debt with the highest interest rate, continue to make the minimum payments on your other debts.
Consider A Balance Transfer Credit Card
A balance transfer credit card allows you to move your existing debt onto a different card with a lower rate, and some cards offer a 0% introductory period. This low rate usually lasts for 6 to 18 months. You should always aim to pay off the entire balance during your introductory period. It’s important to know what the APR will be when the introductory period ends and to understand the fee, if any, you will pay when transferring your balance to one of these cards.
Take Advantage of Supplemental Income
Supplemental income can come in the form of a tax return, a bonus or even money from the holidays. This is typically money that isn’t depended on to pay fixed expenses. With that being said, if you receive supplemental income throughout the year look at putting it toward your debt. It can be hard to let go of this money but knowing you’re closer to ridding yourself of debt usually make it worth it.
Rachel Dix-Kessler is the Consumer Advocate of the personal finance comparison website, finder.com. In her role of Consumer Advocate, she analyzes and reports on the spending and savings habits of Americans. Rachel is passionate about studying financial trends in order to provide actionable advice that encourages more people to talk about and understand, their own personal finances.