3 Strategies to Pay off Your Debt in the New Year
Just as there are different ways to coupon there are different approaches to paying off your debt. Choosing the one that best fits your style will lead you to a higher level of success.
You’ve decided that you are all in and ready to be debt free. You want to eliminate your debt as quickly as possible and nothing is going to stop you. Make a list of all your debts – balances, interest rate and minimum monthly payment. Once you have your list together, reshuffle your list from highest interest rate to lowest interest rate.
Determine the amount of money that you have to put towards your debt each month. This is a good time to look at your overall spending to see if there is anything that can be trimmed allowing more to be put towards your debt and pay it off even sooner! Pay the minimum payment on everything except that debt on the top of your list ~ the one with the highest interest rate. Everything that is left in your “pay down your debt” budget will be paid on this item. Once this item has been paid off you will move on to the item with the highest interest rate remaining on your list. This strategy will allow you to pay off the balances with the highest interest rates first and therefore pay less interest overall by the time all of your debt has been paid. This approach offers the quickest way to pay down your debt.
You are serious about paying off your debt but you want to see progress quickly. If this is your path to success you’ll want to list your debts in order by balance. This time you will pay the minimum on each of the debts except for the debt with the lowest balance. Once you’ve made your minimum payments take everything left in the “pay down your debt” budget and apply it to the debt with the lowest balance. This strategy allows you to start crossing debts off your list and see progress. If you are the type of person who likes to check items off your “to do” list then this strategy will give you the best chance of sticking with your plan to pay down your debt.
You want to pay off your debt but you’re not ready to be “all in” just yet. You’ve looked at your budget and think there may be some wiggle room but you’re not sure if you want to give up your cable package or Starbuck’s coffee just yet. You can still attack your debt. Go ahead and pay your bills according to your budget. Now, here’s where you can make a difference. Look at some small changes that you can make to throw a little bit more money each month into the “pay down the debt” budget.
Here is one example of a small change that can make a difference. If you currently pick up a Large Starbuck’s or Dunkin coffee in the morning maybe you could opt for a Medium instead. Take that $1.50 (or more!) that you are saving each day and put that towards your debt (that’s an extra $45 a month!). You still get to enjoy your coffee but have a little more to put towards paying down your debt. Who knows, maybe as you start seeing your path to a debt free life these little changes can turn into bigger changes and before you know it you’re looking at moving to the extreme or hardcore strategy!
These are three strategies for you to use to pay off your debt and make 2020 the year that you will be debt free! Please share your successes with us and pass along any other tips and tricks that you use to lead a debt free life!
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