The burden of high-interest debts is stressful. It feels crushing as you can never get ahead. In the U.S. alone, Americans owe $1 trillion in debt and that’s just from credit card debt. This doesn’t mean that you need to struggle with your finances and let debt overwhelm you.
Here are 7 smart tips for paying off high-interest debt.
Create a Budget
If you don’t have a budget yet, you must create one. Take the time to create a detailed list of every expense you have each month. Creating a budget will show you where each of your dollars is going. Visit CASH 1 to learn how to create a personal budget for smarter shopping. This will show you where you can cut back on expenses, so you can put that money towards paying down your debt.
Cut Unnecessary Expenses to Pay off High-Interest Debts Faster
Look at what you are spending each month. What areas can you reduce your spending? Entertainment and food are two of the easier categories to reduce.
Eat out less, and pack your lunch more often. Cut back on expensive, unnecessary food and drinks such as alcohol and soda. You may be surprised at how much you are spending each month on food and drinks.
If, like many people you have subscription services, make a list and look at which ones you use the least, and cancel them. Some services also have a lower tier, ad-supported option, which is cheaper than their ad-free service. You can downgrade to the cheaper tier to save money.
Now put the money you are saving towards paying off your debts.
Reduce Your Energy Bills
Consider investing in smart technology for your home. Smart technology can regulate your air conditioning and heating. While the initial upfront cost may be negative, the long-term benefits could include reducing your energy bills and saving money.
Make More Than the Minimum Payment
It’s easy to make the minimum payment, especially on high-interest debt like credit cards. However, making the minimum payment means you will be paying more over the life of the debt. Paying more than the minimum payment each month will help reduce the overall amount you pay.
Set up Reminders to Avoid Late Fees
You probably own a smartphone. Many credit card and loan accounts can be set up with reminders, preventing you from making late payments. Late fees can add up quickly, so avoid them by enabling text alerts and app notifications. By simply avoiding some common credit card mistakes, you can save yourself from getting deeper in debt.
Prioritize Paying off the Highest Interest Debt
Known as the avalanche method, this method means paying off the highest interest debt first. Then, once that debt is paid off, you put that money towards the next highest debt. Repeat this cycle until your debts are paid off.
Negotiate for Lower Interest Rates
While it may be difficult, in some cases it is possible to negotiate a lower interest rate on some of your debts. For example, if you have a credit card with a high-interest rate, you should call your credit card company and see if you can negotiate a lower rate. If you’ve made your payments on time, they might be willing to work with you at a lower rate.
Don’t Get Discouraged
Don’t get discouraged. It may seem impossible to pay off some of your high-interest debts, but with diligence and patience, you can make it happen.
Have you managed to pay off any high-interest debts? Got any tips for our readers? Let us know in the comments below!