What is the best way to pay off debt? That’s the question you ask yourself if you barely see any progress on your debt repayments. You may have struggled reducing your debt balance but the debts stay at the same level as when you started your repayments a few months back.
If you have such an experience don’t get discouraged easily. It’s just a sign that your plan doesn’t work as your expectation. What you need to do is sit and find out why you haven’t enjoyed the fruits of your hard work. Here’s what you can do today.
Strong Reasons to Get Out of Debt
Jim Rohn once said reasons come first, answers come second. To reach your debt-free goal you must have a lot of reasons. Your “why” must be strong enough so you’ll find ways to get out of debt and the goal attainment process will become a personal obsession.
You want to have a look at these reasons and use them as a starting point for developing your own:
1. Debt limits your finances. If you carry credit card balances from month to month you must have spent most of your earned money for paying those debts. This means there is only a limited amount of money left after debt repayments. To make ends meet you have use other credit cards or loans and end up with new debts. This cycle can go on and on until you find the interest grows larger than the principal.
2. Debt limits your abilities. How do you feel when the most of the money you make each month goes to your creditors? Will you be able to keep motivated at work in such a situation? Fact is many of us will be unhappy and less motivated at work. This is a situation that could cause your work to deteriorate and even leads to you losing your job.
What is the strongest reason to be debt free? The answer is slavery.
At the beginning you may have worked hard for yourself and your family. You probably get a decent income but you must set aside some of the funds to pay off your debts. When the debts accumulate you’re starting to become a slave. At the last stage, you’ll work almost for nothing because it’s your master –your creditor– who actually gets your wage and enjoys it.
Now that you know the strongest reason to get rid of your debt you want to create a sensible plan to reach the goal. Here is what to do next.
The Best Way to Pay Off Debt – Plan
The best way to pay off debt is to formulate a goal and the right strategy to do it. This plan allows you to focus on your efforts on accomplishing your debt payoff goal. This is especially true if you want to make some sacrifices. Even with strong reasons you would still want your sacrifices impact on your goal significantly.
Here is the best way to pay off debt in details:
1) Stop borrowing. The first step to pay off credit card debt is to put a limit on that debt. If you tend to associate your credit cards with buying power STOP using the cards and throw them out. Ignore any forms of credit card offers trying to attract your attention. This way you will prevent your debts from growing because you add a new debt.
2) Pay more than the minimum. A low minimum payment may look like a convenience or a facility for consumers but it is actually a very dangerous trap. The lower you pay your balance the longer you will be paying the interest. The interest will make you a slave to the master, your credit card companies. For that reason, make sure to keep the interest growth down by putting as much money as you can to your monthly payments.
3) Cut back on your expenses. This step involves making some sacrifices and save money out of them. You can start with a budget to find expenses to sacrifice. Once done, just add the money saved to your monthly payments to speed up your way to reach your debt payoff goal.
As you can see above, the first step involves putting a limit on your overall debts then stopping the growth of the interest and finally speeding up the repayments. But how do you apply the best way to pay off debt plan to your specific situation?
The Best Way to Pay Off Debt – Implementation
Before you put the plan into action check your overall financial picture. You want to have a look into the amount of money that comes to you and the amount of money you spend for your needs. Just jot down all expenses to know how much is left to you.
Can you stop borrowing with what is left each month? Can you generate other sources of money to pay off debt? These are some questions related to your ability to get money to cover your monthly expenses and put limit on your debts.
If you have several debts and your wage is just not enough to cover the minimum payments call your creditors to lower interest rates and remove late charges. If that doesn’t work but you have good to excellent credit score you may want to transfer your credit card balance to a zero APR credit card or get a consolidation loan.
To speed up your debt repayments start getting rid of the different unnecessary expenses. Food, entertainment and travel expenses are good items to sacrifice out of your current lifestyle. But you can also raise money from selling assets or earning extra income. Just put the money you get from the combine efforts towards your monthly payments.
The best way to pay off debt simply talks about planning and implementation to get out of debt and be debt free. Just carry out the plan with determination and you’ll see your debt accounts gradually shrinking.