Simple guide to paying off lingering debt

If you find yourself collecting more and more debt while struggling to figure out how you will ever pay it all off, it might be time to develop a step-by-step strategy. Paying off debt starts with making a budget and continues with changing your habits and rewarding yourself for progress. A few contributors to the U.S. News My Money blog offer a guide to get rid of the debt that’s been following you around for too long:

1. Create a budget.

“The first step to solving your debt problem is to establish a budget,” says Money Crashers contributor David Bakke. You can use personal finance tools like Mint.com, or make your own Excel spreadsheet that includes your monthly income and expenses. Then scrutinize those budget categories to see where you can cut costs. “If you don’t scale back your spending, you’ll dig yourself into a deeper hole,” Bakke warns.

2. Pay off the most expensive debt first.

Sort your credit card interest rates from highest to lowest, then tackle the card with the highest rate first. “By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards,” says retail analyst Hitha Prabhakar.

3. Pay more than the minimum balance.

To make a dent in your debt, you need to pay more than the minimum balance on your credit card statements each month. “Paying the minimum — usually 2 to 3 percent of the outstanding balance — only prolongs a debt payoff strategy,” Prabhakar says. “Strengthen your commitment to pay everything off by making weekly, instead of monthly, payments.” Or if your minimum payment is $100, try doubling it and paying off $200 or more.

4. Take advantage of balance transfers.

If you have a high-interest card with a balance that you’re confident you can pay off in a few months, Trent Hamm, founder of TheSimpleDollar.com, recommends moving the debt to a card that offers a zero-interest balance transfer. “You’ll need to pay off the debt before the balance transfer expires, or else you’re often hit with a much higher interest rate,” he warns. “If you do it carefully, you can save hundreds on interest this way.”

5. Halt your credit card spending.

Want to stop accumulating debt? Remove all credit cards from your wallet, and leave them at home when you go shopping, advises WiseBread contributor Sabah Karimi. “Even if you earn cash back or other rewards with credit card purchases, stop spending with your credit cards until you have your finances under control,” she says.

6. Put work bonuses toward debt.

If you receive a job bonus around the holidays or during the year, allocate that money toward your debt payoff plan. “Avoid the temptation to spend that bonus on a vacation or other luxury purchase,” Karimi says. It’s more important to fix your financial situation than own the latest designer bag.

7. Delete credit card information from online stores.

If you do a lot of online shopping at one retailer, you may have stored your credit card information on the site to make the checkout process easier. But that also makes it easier to charge items you don’t need. So clear that information. “If you’re paying for a recurring service, use a debit card issued from a major credit card service linked to your checking account,” Hamm suggests.

8. Sell unwanted gifts and household items.

Have any birthday gifts or old wedding presents collecting dust in your closet? Search through your home, and look for items you can sell on eBay or Craigslist. “Do some research to make sure you list these items at a fair and reasonable price,” Karimi says. “Take quality photos, and write an attention-grabbing headline and description to sell the item as quickly as possible.” Any profits from sales should go toward your debt.

9. Change your habits.

“Your daily habits and routines are the reason you got into this mess,” Hamm says. “Spend some time thinking about how you spend money each day, each week and each month.” Do you really need your daily latte? Can you bring your lunch to work instead of buying it four times a week? Or perhaps you can start cooking more at home. Ask yourself: What can I change without sacrificing my lifestyle too much?

10. Reward yourself when you reach milestones.

You won’t pay down your debt any faster if you view it as a form of punishment. So reward yourself when you reach debt payoff goals. “The only way to completely pay off your credit card debt is to keep at it, and to do that, you must keep yourself motivated,” Bakke says. Just make sure to reward yourself within reason. For example, instead of a weeklong vacation, plan a weekend camping trip. “If you aim to reduce your credit card debt from $10,000 to $5,000 in two months,” Bakke says, “give yourself more than a pat on the back when you do it.”

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A Simple Guide to Paying Off Lingering Debt originally appeared on usnews.com

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