Most people want know how to get out of debt fast and I don’t blame them. It can be like this dark cloud looming over you as long as you are in debt. At least that is how we felt when we were in debt. It felt like we were just getting by and it was hard to see the light at the end of the tunnel.
We decided that we needed to get a handle on our finances and developed a plan to eliminate our debt. Here is what we did to pay off $52,000 in debt in 18 months which makes us debt-free except our home.
Develop a Financial Gameplan to Get Out of Debt Fast
If you have read anything that I have written, you have probably heard of this before. It is basically a form that has your entire financial picture on one piece of paper (Download form). This will tell you ultimately how much money you have to work with every month to pay down debt. It will also reveal to you areas where you can cut back to get more money with which you can tackle your debt.
Organize Your Debt
List all of your debt on one piece of paper from smallest to largest (You can use this Debt Reduction form). Than start paying minimum payments on everything except the smallest debt. Take whatever your surplus is, that is, the money you have after paying all your bills and throw that at your smallest debt. For instance, if you have $100 in surplus and the minimum payment on the first debt is $25, now you will pay $125 per month until that debt is gone. What if one of my debts has a higher interest rate than the smallest one? Well, that does factor into the equation but I wouldn’t focus on that much. The idea is to develop a system to pay off all your debt fast. Once you begin paying off some of the small debts, you feel like you are making progress and momentum will build. Keep at it and soon enough you will be DEBT-FREE!
Here is an example to help you organize your debt:
Sell What You Don’t Need
When we were getting out of debt, I was shocked at how much stuff we had to sell. Go through your drawers, your closets, your cabinets and pull out everything you don’t need or don’t use. I used the 1 Year Rule to help determine what to sell. If I hadn’t used it in the past year than I probably didn’t need it. Besides when you are debt free, you can buy it again if you find that you do actually need it. For more tips, read how to Sell Unused Items to Pay Off Debt.
Trim Your Expenses
Go through your Financial Gameplan or budget, look at each line and say, “How can I make this number smaller?” We were able to decrease a lot of our expenses by simply doing this one thing. I called our cell phone company, insurance agency, internet provider and was able to cut the monthly cost for each one. For more tips on reducing your monthly outflow see 10 Ways to Trim Your Budget.
Consider Consolidating Your Debt
I do think that the Debt Snowball is the way to go when paying off debt, however, sometimes it makes sense to consolidate your debt when you have multiple high interest credit cards. If you are paying over 15% in interest on multiple cards, then consolidating to something much lower can make sense. For instance, Lending Club will let people borrow $1,000 – $35,000 and has rates starting at 5.99% APR. Rates range from 5.99% to 32.99%* APR and the best APR is available to borrowers with excellent credit.
Increase Your Income
Apply for a second job at a pizza joint, serve at a restaurant, deliver papers, do anything you can to bring in more income. I did this and I was able to get a second job in 8 days as a pizza delivery driver. There are many other ways in which you can increase the money you bring in. For more ideas see 10 Ways to Earn Extra Cash.
Give it all you got. Once you make a commitment, stick to it. In poker, you go all-in if you are confident you have what it takes to win the hand. If you want to get out of debt fast, then you need to be All-in.
Have any questions relating to getting out of debt? Ask Deacon.
Image Credit: Images of Money