If it’s time to get your financial house in order and you want to reduce your debt load, there are some things you can do to eliminate debt quickly without compromising too much on your current lifestyle. Putting yourself on a path to a debt free life can make money management that much easier as you change jobs, buy a house, or simply save more money.
Follow these 8 steps to be debt-free in one year or less:
1. Stop the excessive spending! This may sound obvious, but many people are in debt because of overspending, pure and simple. It’s time to prioritize and cut back on all the extras. Nix things like eating out, manicures, hair appointments and other “wants” but not “needs.”
Also, don’t let yourself fall into the temptation of thinking: “I already have $5,000 in debt, what’s $500 more?” That kind of thinking will keep you mired in debt forever. Rule #1 if you want to get out of a hole: is that you have to stop digging. And make no mistake about it: continually spending while you’re already in debt is just digging yourself further into debt.
2. Review your budget to make higher debt payment contributions.
If you’ve only been making minimum payments on your credit cards, you may be setting yourself up for several years of debt. Make a commitment to pay down debt faster with higher monthly payments.
3. Use a bonus or savings to pay down debt.
If you are carrying a significant amount of high-interest debt, use a recent bonus check from your job, some of your savings, a tax refund check or another “windfall” to reduce that credit card balance quickly.
4. Call your creditors.
If you’ve been a longtime credit cardholder or have been diligent about making your loan payments on time, you may be in a position to negotiate for a lower interest rates. You can make bigger payments at a lower interest rate to pay down that balance quickly.
5. Sell some extra items.
Take inventory of household items, toys, and even gently used clothing and start selling them on eBay or Craigslist for some extra cash. Just make sure you are using those funds to pay down debt – not to engage in additional spending. The website Gazelle.com will also buy back unwanted electronics you may have laying around – like old phones, laptops or computers.
6. Authorize a balance transfer.
If you have a good credit score and are ready to consolidate some of your debt, consider coordinating a credit card balance transfer so that you can eliminate high-interest rate credit cards from your lineup altogether. Take advantage of zero percent and low-interest rate offers but make sure you are have a plan to pay off the balances during the promotional periods.
7. Get a part-time job.
If you have a few hours to spare each week, find ways to increase your income so that you can make larger debt payments. If getting another job isn’t feasible, consider talking to your boss to discuss a pay raise or apply for a position with a higher salary. Anything you can do to increase your income can make it easier to reduce your debt load.
8. Cash in your life insurance policy.
This can be a good debt payoff strategy if you need to pay off large amounts of debt quickly but is only effective if you have a whole life insurance policy that has some cash value. If you have beneficiaries, you may have the option to allocate some of the life insurance proceeds to them.
These are just 8 strategies that can get you on the road to a debt free life. There are lots more. What are you doing – or what have you already done – to eliminate your debts?