If you’re feeling overwhelmed by debt, you’re not alone. According to a 2021 report from CNBC, the average American is $90,460 in debt, including credit cards, student loans, mortgages, and other consumer debt.
No matter the amount of debt you have, you can take steps to get it under control. Here are five tips to help you break free from debt and reach financial stability.
Make a list of your debts
The first step to getting out of debt is becoming aware of what you owe. Start by making a list that includes the balance and interest rate for the following types of debt.
- Credit card debt
- Student loans
- Personal loans
- Auto loans
- Medical debt
- Tax debt
If you’re unsure what money you owe, check your credit report for details regarding your debts.
Create a debt repayment plan
It’s crucial to create a plan to pay off your debt and prioritize which balances to pay first. Many people choose to pay off their debts from smallest to largest — known as the debt snowball method. Others pay their debts with the highest interest rates first, known as the debt avalanche method. Both strategies can help you pay off debt faster, though the avalanche method may help you save more money in interest.
Pay more than the minimum
If you’re wondering how to get out of debt fast, paying more than the minimum is key. When you carry a balance on a credit card and only pay the minimum each month, the amount you owe increases due to interest. Interest rates on credit cards are high — with 16.45% being the national average. If you can swing it financially, paying more than the minimum will save you money in the long run and get you out of debt faster.
Create a budget
Creating a budget helps you make the most out of every dollar and become aware of your income and expenses. When you’re aware of your finances, you will have a better idea of what you can afford to pay on your debts and find wiggle room in your budget to allow you to put more towards your debt.
There are several ways to create a budget, such as an excel spreadsheet or apps like MINT or EveryDollar. The key is to start budgeting to see what works for you and then perfect the process over time. Sticking to a budget is challenging, but you will see the best results by staying consistent with your budget.
Find ways to bring in some extra cash
You will need to pay more towards your debts each month to pay off your balances faster. Many people don’t have the room in their budget to pay extra towards their debt, which means you will need to cut your expenses or increase your income.
Fortunately, it’s easy to add an extra income stream by starting a side hustle. Common side hustles include:
- Rideshare/delivery driver
- Pet sitting
- Online English tutoring
- Freelancing
- Blogging
- Reselling furniture and other items
- Housecleaning
- Online surveys
- Dropshipping
The bottom line
Though paying off debt may seem overwhelming, it is possible by taking the proper steps and staying consistent. By following the tips detailed above, you will be out of debt and on your way to a better financial future in no time. You got this!
