Cure Your Holiday Hangover: 5 Tips To Pay Down DebtJanuary 5, 2016
Now is about the time all those holiday bills start pouring in. If opening your mail is giving you post-spending anxiety, then it’s time to come up with a plan to pay down your debt as quickly as possible. These five tricks can help you pay debt down sooner without cramping other areas of your life.
Just remember to be realistic about your payment plans and amounts, make sure it is something you can afford, and if you’re really serious, consider cutting back on other spending habits to pay down debt more aggressively.
1. Make Bi-Weekly Payments vs. Monthly
This mortgage trick works great for any time you’re trying to pay off debt sooner, especially when tackling credit card debt. By switching your payments to bi-weekly, you actually make more payments over the same period of time than you would if you were paying monthly, saving you money on interest and helping you clear that cache sooner.
2. Set Up Automatic Payments
Automatic payments help ensure you don’t miss a single payment while also keeping your credit in check. They make paying down debt easy, but may require you to do some budgeting in order to settle on an appropriate amount. The following budgeting articles can help you come up with a financial plan that works for you and your unique situation.
- Clean House Before You Buy A House: Take Control Of Your Money
- Turning Over A New Leaf: Sorting Out Your Finances For Fall
- Recent Grad? How to set your life up on a budget
3. Try the Snowball Effect
If you’ve acquired multiple debts, the snowball effect is one way to pay off debt. Start by setting up automatic payments for all of your debts for the minimum amount, but set a larger amount towards your debt with the highest interest or the debt with the lowest balance. Once this debt is paid off, take that amount and apply it to your next highest interest or lowest balance debt and then to the next one until you erase them all.
4. Pay More Than the Minimum
It takes a long time to pay off debt if you’re only paying the minimum amount. Small monthly payments combined with accumulating interest mean little is going towards your principal debt. If the snowball effect isn’t for you, try setting up automatic payments for more than the minimum amount to increase your contributions. Anytime you find yourself with extra cash, throw an extra payment into the mix to see your debt decrease quicker.
5. Put the Credit Card Away
Now that you’re paying down debt, the last thing you want to do is accumulate more. Put the credit card away until you have paid off your debts. If you must use it, be sure to pay off any new purchases in full. If you’re struggling, you may also want to consider switching to a low interest card with a low balance transfer.
Chip Away At Your Debt by Finding Other Ways to Save
Paying down debt isn’t easy, but there are ways to save money that can help you tackle what you owe. Sometimes it’s the littlest changes that can make the most difference. For example, when was the last time you compared quotes for your car insurance? Ease the strain on your wallet and shop around for cheaper car insurance rates. By our estimation you could save up to $670.
Have you found any other helpful tips when it comes to paying down debt? Share your insights in the comments below.