The Best Ways To Lower Your Debt

Apr 15, 2021 | Lifestyle

It’s often far too easy to get into debt, especially if you’re struggling with cash flow problems, but it can be very tough to get back out of debt. It can take only a few months to create a large amount of debt, which can take years to pay off. 

Everyone who pays orf their debt manages it in a different way. They will often combine methods to gradually pay off their debt, and stick to those strategies until the debt is gone. If you’re struggling and need somewhere to start, you can try some of these strategies to lower your debt. 

1.  Stop creating more debt

This won’t get you out of debt, but your debt won’t be getting worse. If you keep adding to your debt, it will be harder to get your debt down, if you make any progress at all. Reduce the temptation to run up more debts by cutting up your credit cards, or hiding them from yourself. Prioritize high interest or more serious debts, like an IRS notice lt11 to pay off first. 

2.  Increase your monthly payment

The less you pay toward your debt balances, the longer it will take you to pay them off. Interest can make it take even longer to pay off your debt. Any debt balance that is left will be racking up interest charges every month. 

Look at credit card debt. The average credit card interest rate is quite high, which means that the credit card debt you have will get worse every month. If you can increase your monthly payments, you can reduce the balance that is subject to interest. 

It’s only ok to pay the minimum on some of your credit cards when you have a debt repayment strategy that means you have to make a big payment on one of your credit cards. The key is to make sizeable dents in at least one of your outstanding balances every month.

3.  build an emergency fund

An emergency fund might sound unhelpful if you’re trying to get out of debt. You might think you could use that money to pay off your debt instead of putting it in a savings account, but an emergency fund can help you to avoid building more debt. Savings give you a backup that you can use if an emergency comes up, instead of turning to your credit card. Ideally, your emergency fund should have six to twelve months of living expenses in it, but build up whatever you can. 

4.  pick a debt and give it all you got

Some people put up all their minimum payments by just a little bit, but by doing that, your payments only fall by a small amount each month. You can make a lot more progress by making a large payment to just one of your accounts every month until that debt is cleared. In the meantime, you can make the minimum payments on all your other accounts. Clear one debt, then do the same with another, until they’re all paid off. 

best,

– a contributed post

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