Trim that Extra (Financial) Weight: 5 Tips on How to Get Out of Debt Fast
Have you ever stepped on a scale and been shocked at the number looking back at you? You think, “How could that be?!”. Sometimes your weight creeps up on you without you even realizing it. The same thing can happen with your debt. You think you have everything under control, then you take a look at the numbers and what you see is jaw-dropping. If you’re in this situation and ready to get that debt number way down, here are five tips on how to get out of debt fast.
1. Prioritize high-interest debt
Ready to see that debt number go down? Then you need to tackle the interest. Interest is what makes debt difficult to get out of. It feels like you’re taking one step forward and two steps back when so much of your payment is going toward interest. That’s why you want to focus on your high-interest debt first, while paying the minimum on the rest of your loans.
So if you have a mix of credit cards, student loans, and a car loan, it’s likely your credit cards will have the highest interest. Focus on ditching that debt first. Once that’s paid off, go to the next highest interest rate and work your way down until your debt is G-O-N-E.
You can decrease that debt number by focusing on high-interest debt first as you’ll lower the total cost of your loan by paying less in interest.
2. Make bi-weekly payments on your student loans
If you have student loans, there’s one thing that can keep your debt number high — the fact that your interest accrues daily. Yep, as sure as the sun rises, your student loans are accruing interest.
One simple way to combat this issue is to make bi-weekly payments instead of monthly payments. You can divide your monthly payment in two and make that payment every two weeks. Doing so can help you lower the interest and tackle more of the principal balance. On top of that, it’ll result in one more payment each year.
If you want to learn how to get out of debt but feel like you can’t put too much extra to debt, this strategy is a great option.
3. Stop the damage with a cash diet
If your debt number is too high, you need to stop the damage first. That means not taking on anymore debt and focusing on the debt you have. If credit card debt is a major pain point, it’s time to give them a rest, at least for a while. You want to go on a cash diet, where you only use a specific amount of cash each week and only use the money you have in your account.
A cash diet can help reset your reliance on credit and help you adjust to spending what you have.
4. Boost your payments
Here’s an unfortunate reality: you won’t get that debt number down quickly just paying the minimum. It’s called ‘minimum’ for a reason and if you want to learn how to get out of debt fast, you need to boost your payments.
You may be feeling like you have no extra money to put toward debt. We get it, it’s tough. But time to get creative. Look at ALL of your expenses. What can you cut out to make room to pay more toward debt? Can you Marie Kondo your place and sell the stuff that no longer brings you joy? Move back home? Get a roommate? Pick up a side hustle with Uber, Lyft, Postmates or Instacart? Getting out of debt is not easy or everyone would do it. So yes, it will take some sacrifice and creativity. But with some hard work and hustle, you can boost your payments and pay more than the minimum.
To help inspire you, pick a debt-free date, and calculate how much you’d need to pay each month to reach your goal. Even if you can’t meet that goal, trying for it will help you get ahead much more than just paying the minimum.
5. Evaluate your tax withholding
Tax time is coming up and you may be gearing up for a tax refund. You can’t wait and already know what you’re going to use it for! Many people get a tax refund and then spend it on fun. But if you adjusted your tax withholding, you could boost your paycheck each month to put more toward your debt. You wouldn’t necessarily get a refund but you’d be earning more throughout the year to put more toward debt. Of course, you want to talk to a tax specialist or HR to see what is right for your situation but it’s something to consider.
Final word
If you want to learn how to get out of debt fast, you have to make moves to make it happen. These five tips can help you get on the path to debt-freedom so your money can once again be all yours.