If you’re struggling to manage your debt and don’t have a plan to pay it off, start here. These easy ways to cut down your debt include financial strategies recommended by experts as well as simple tips to improve your money habits.
Before you start repaying you debts, first make a list of each one you owe along with its type, remaining balance and interest rate. Identify whether the debt is credit card, student loan, mortgage debt or something else.
Then, start making a plan with these 14 easy ways to pay off debt:
— Create a budget.
— Pay off the most expensive debt first.
— Pay off the smallest debt first.
— Pay more than the minimum balance.
— Take advantage of balance transfers.
— Stop your credit card spending.
— Use a debt repayment app.
— Delete credit card information from online stores.
— Sell unwanted gifts and household items.
— Change your habits.
— Increase your income with a side hustle.
— Consider debt consolidation.
— Get help from a credit counseling agency.
— Avoid returning to bad habits when you reach your goal.
1. Create a Budget
To repay your debt, start by tracking your income and expenses with a monthly budget.
A budget is an easy way to get organized at the start of debt repayment. Yours can be as simple as a spreadsheet or more complex, utilizing budgeting apps like Mint to closely track every expense and debt payment.
[SEE: 10 Best Budget Apps.]
2. Pay Off the Most Expensive Debt First
A strategy called the debt avalanche involves repaying debts with the highest interest rates first. You continue to pay the minimum on your other, less expensive debts but focus any extra cash you have on the most expensive ones.
This strategy may save you money in the long run by getting rid of bad debts more quickly.
“Most Americans are making suboptimal decisions when it comes to managing debt,” Joseph Goetz, founder and chief information officer of Elwood & Goetz, says.
“There are millions of American households sending extra money to their mortgages while at the same time, they have an auto loan or a credit card at a much higher interest rate, and that’s costing them thousands of dollars over time,” he adds.
3. Pay Off the Smallest Debt First
This strategy, known as the debt snowball, requires tackling the smallest debts first. Starting by repaying a small debt in full is easier than trying to take on a large student loan or mortgage debt. In addition, repaying a small debt may give you the motivation you need to continue on your repayment journey.
Determining which debt to tackle first can depend on your financial stability and other factors.
4. Pay More Than the Minimum Balance
To make a real impact on credit card debt, you’ll likely need to pay more than the minimum balance each month.
You may also consider putting extra money toward the principal on a home mortgage, as long as those extra payments wouldn’t be better utilized on other debts.
5. Take Advantage of Balance Transfers
A balance transfer allows you to move your debt from one account to another. You may want to do this if the new account offers a lower interest rate permanently or as part of an introductory offer. You will, however, have to apply and get approved for the new balance transfer card, which often requires good credit.
6. Stop Your Credit Card Spending
If overspending is causing you to add to your debts unnecessarily, try removing your credit cards from your wallet completely. This strategy is simple, but it can eliminate the temptation to overspend and allow you to focus on getting your finances under control.
7. Use a Debt Replacement App
Debt repayment apps like Tally and Undebt.it help users track their debts and provide a visual, easy-to-understand tool for paying them off.
You can also take advantage of free credit reports and services that allow you to closely monitor your credit score. Major credit bureaus Equifax, Experian and TransUnion must make these reports available to consumers for free annually.
8. Delete Credit Card Information From Online Stores
If it’s not enough to remove your credit card from your wallet, take the self-control measure a step further by deleting credit card information stored on sites like Amazon. Online shopping can be a real barrier to eliminating debt, so take steps to kick this habit.
9. Sell Unwanted Gifts and Household Items
Come up with some extra cash by selling unwanted items from your home. This is easier than ever with shops like Poshmark and the RealReal, which specialize in consignment clothing — and sites like Facebook and Craigslist, where you can buy and sell just about anything. Put all the money from your sales toward paying down your debts.
10. Change Your Habits
Overspending and accumulating large debts is often a behavioral issue, according to Colin Moynahan, financial planner and founder of Twenty Fifty Capital. Be honest with yourself about your daily habits and spending, then make the necessary lifestyle changes to start repaying your debts.
“You have your necessary expenses — food, shelter, health — and then you’ve got the discretionary stuff,” Moynahan says. “When you talk about avoiding debt, it comes back to priorities. Is this a necessary expense or a discretionary expense? If you truly went through your statement line by line, I think most people would be surprised by how much of that is discretionary.”
[Read: Inside the Psychology of Overspending and How to Stop.]
11. Increase Your Income With a Side Hustle
The larger your shovel, the faster you can dig. Increase your income stream by taking on a second job or freelance project, then use those extra funds to quickly repay your debts. Jobs like pet sitting, tutoring or working as a virtual assistant are easy to start and can provide enough cash to make a dent in your debts.
12. Consider Debt Consolidation
Debt consolidation allows borrowers to repay their debt to a single loan with one monthly payment. Consolidation can also lead to a lower interest rate, and it can be an opportunity to negotiate a better repayment plan for certain debts.
[Read: Best Debt Consolidation Loans.]
13. Get Help From a Credit Counseling Agency
Debt repayment can be overwhelming. If you want support, contact the National Foundation for Credit Counseling to receive free help with debt management.
“This is a network that’s not for profit, and it’s a place for people to get help,” Goetz says. “A lot of people end up going to for-profit entities, as there’s a huge amount of fraud taking place for people who are vulnerable and have large amounts of debt.”
14. Avoid Returning to Bad Habits When You Reach Your Goal
Once you reach your goal, you’ll need to continue your good money habits to stay out of debt. Take the time to understand how you came to be in debt to avoid finding yourself there again.
“The only way to truly pay off debt in the long term is to fix the underlying reason — usually spending, or else the debt’s going to come right back,” Moynahan says.
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14 Easy Ways to Pay Off Debt originally appeared on usnews.com
Update 05/09/23: This story was published at an earlier date and has been updated with new information.
