Whether you’ve been left with a debt hangover after the holidays or are still struggling to pay off the debt load you’ve acquired over the years, make 2016 the year you free yourself of the burden of credit card debt and loans. The new year is the perfect time to put together a debt payoff plan and restructure your budget. You can downsize that mountain of debt even faster with a few adjustments to your spending habits and tweaks to your budget.
Here are six easy tricks to pay off debt in 2016:
1. Double your minimum payments. Give yourself a chance to get out of debt fast by paying at least double the minimum payment due on every card or personal loan your budget will allow. This will help to prevent extra interest charges and pare down that balance faster. If you have a hard time doubling up that minimum payment, consider increasing the frequency of your payments instead — pay the minimum payment twice per month instead of all at one time so you are still bringing down that balance.
2. Start a snowball effect. Focus on making the largest debt repayments to credit cards or loans with the highest balances or interest rates so that you can cross that debt off your list entirely. Then, move on to the next. This is known as a snowball effect because it helps you build momentum with your debt payoff plan and quickly clears up your debt load. The key to making this work is consistency. Consistently make the same amount in debt repayments each month, regardless of which debt it goes toward, so you become comfortable with making that payment. You will pay off those debts faster than you realize and will see those balances shrink within a few short months.
3. Set new spending limits. If you always find yourself turning to credit cards when you come up short to cover everyday purchase near the end of the month, or you have a hard time staying within a budget, it may be time to set some new money boundaries. Take stock of your current spending habits, and identify some of your triggers or areas where you tend to overspend. Create a budget for different types of purchases you indulge in throughout the month, so you can put a cap on spending in each area. This strategy can help you get into the habit of saying “no” to certain purchases you simply can’t afford and use extra funds to pay down debt instead.
4. Downsize your life to a comfortable level — temporarily. If the idea of cutting out some of your monthly expenses seems impossible, change your approach to one of downsizing and eliminating instead. Consider how much you really need cable service, extra phone lines, lunch or coffee at work, or even extra space in your home. Downsizing your life to a comfortable level may involve simply eliminating some of those extra purchases each week or something more aggressive like moving to a smaller space so you can free up some cash. If you are truly committed to paying off debt quickly, you can use that cash specifically for debt payments and then upgrade your life when you are finally debt-free.
5. Consolidate and transfer your balances. You can make balance transfer programs work for you as long as you take transfer fees into account and are realistic about how long it will take you to pay off the entire balance. Review offers in detail, and calculate your total savings when you transfer to a 0 percent interest or very low interest credit card. If you have the ability to make large payments on a lower interest card, you may be able to pay down a formerly high interest debt that much faster because more of your monthly payment will go toward the principal balance.
6. Reward yourself. Whether paying down debt was one of your resolutions this year or you’re just tired of carrying that heavy debt load for yet another year or two, consider setting up this financial project as a positive goal with a reward attached to it. Giving yourself some positive reinforcement in the form of a gourmet dinner or a similar splurge can help you feel good about your commitment to pay off that debt and get your finances in order. Just make sure the cost of the reward fits within your budget so you aren’t overextending yourself financially in another way.
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6 Tricks to Pay Off Debt in 2016 originally appeared on usnews.com
