It may start out simply enough, and you may think you have the resources to cover that credit card charge, or the additional car loan payment. However, life is full of unexpected surprises that can change your financial situation for the worse. Before you know it, you may be left with mounting debt that’s continuing to grow in spite of your best efforts to keep up with it. Here are a few ideas that can help you make a dent in your debt so you can begin to improve your financial situation.
Exceed Your Required Monthly Payment
Each month, your credit card company will send you a bill with a minimum required payment for the previous billing cycle. While making this payment on time is important for your credit, paying that minimum amount isn’t really doing anything for your debt. The bulk of the payment goes toward the interest that the credit card company is charging, so only a few dollars will go toward paying off your debt. Paying over the required amount will help you work away at what you owe. Keep in mind that reducing your balance means you’ll also be charged less in interest each month.
Use the Snowball Strategy
One method for paying off debt that financial experts, such as those at Truman Advisors, recommend is the snowball strategy. When you build a snowball, you start out with a small wad of snow and pack more snow onto it until it reaches the desired size. Similarly, this strategy involves paying off your smallest debts first, while making the minimum payments on all of your other debts. Once you eliminate that first debt, move to the next smallest debt, putting in the money you were using to pay off that first debt. One by one, this will help you pay off each debt in succession.
Get Additional Work
In spite of your best efforts, you may not be making enough money to pay off the debt you have accumulated through the years. In many cases, the best thing you can do is to increase the income you’re bringing into the household each month. Fortunately, there are many more opportunities available today than there were just a few short years ago. If you’re not keen on working a second full-time job, there are plenty of options for working just a few hours a day. You can become a food delivery driver, or drive for a ridesharing company, if you like the idea of spending time on the road. Alternatively, there are many freelance opportunities and work from home opportunities available online. Whatever your niche, you’re likely to find someone who needs your skills.
Start Selling Your Things
Another option is to start selling off things you don’t need, and using that money to pay your debts. You can start by going through your home and gathering up old clothes, abandoned toys, and unused electronics. Selling these items online may help you make more than you would by selling them at a yard sale. If you’re creative, you can also sell your paintings, digital artwork, or writing online. If you’re talented enough, and you can develop a large following, this may be enough to pay off the majority of your debt.
Consolidate Your Debt
If you have multiple credit cards, it may be helpful to see what a debt consolidation service, such as that offered by Truman Advisors, can do for you. Often, you can obtain a loan that will help you pay off most, if not all, of your debt. This will put all of your debt into a single monthly payment, making it easier for you to keep track of your monthly bills. Additionally, a consolidation loan will charge lower interest than that charged by credit card companies, which makes it easier for you to pay your debt off faster. This is often the best way to make a large amount of debt more manageable.
If you can reduce your monthly spending, you’ll have more money to devote to paying off your loans and credit cards. You should begin by determining what services you can do without in the immediate future. This may mean canceling your cable, newspaper, and other subscriptions. By relying solely on internet services, and the free content legally available online, you can eliminate these monthly expenses without really missing them. If you can go a few months without driving your car, consider storing it in your garage, and discussing the possibility of canceling your insurance. Depending on state laws, this may not be an option, but it’s worth exploring. Anything from quitting smoking to canceling your gym membership can help you save more money each month.
Ask for More Favorable Repayment Terms
Another tip that you can borrow from Truman Advisors and other debt consolidation companies is to contact your creditors and ask for more favorable terms. In fact, this practice is more common than you might think, and many companies will be willing to negotiate for a lower interest rate or lower monthly payments. While you may run into some lenders who refuse to consider more favorable terms, it can’t hurt to ask. If they say no, you’ll be no worse off than you are now.
Don’t Spend That Unexpected Windfall
It’s easy to get swept away in the moment when you come into some extra money, but you should resist the urge to splurge. Instead, take the extra money you get from your raise, bonus, lottery winnings, or birthday gift and use it to knock off a chunk of your debt. If you make this a long-lasting rule, the extra cash will help you get out of debt that much sooner. That can be a more valuable gift to yourself than anything else you might have considered buying.
Try Asking for It
One option that more people are trying is to ask the public for the money they need. Some are trying to eliminate debt, while others are trying to finance a business venture, or make a dream come true. Making use of crowdfunding websites helps you tell your story and ask for donations to help you with your problem. While this may be difficult if you’re a private person, sharing your story may be enough to convince others to help you. As long as you realize that the site will deduct a small percentage of your earnings as their fee, this can be a good method for getting the money you need to pay off your debt.
Sell Your Car
Depending on where you live and the value of your vehicle, selling your car may be an option. Selling your vehicle will help you save money by eliminating the money you would otherwise spend on insurance, upkeep, and fuel. Additionally, the money you make on the sale of the vehicle can be used to pay off your debts. You’ll have to consider how much you owe and the value of your vehicle but selling the vehicle may be enough to completely eliminate your debt. It may be worth relying on public transportation to give you this fresh start.
Bankruptcy is a Last Resort
You may not want to think about bankruptcy at all, but this is an option of last resort that can help you escape overwhelming debt. Of course, you will want to try every other recommendation first, but, if Truman Advisors and similar debt consolidation companies can’t help, the courts can provide relief. While this will help you get your life back under control, it’s important to remember that this also means your credit will take a major, lasting hit. Depending on how aggressive you are in rebuilding your credit, it can take up to seven years or more just to reach a good score again. If you really feel there are no other options available to you, filing for bankruptcy may provide the fresh start you need.
Start an Emergency Savings Account
Even before you start paying off your debt, you should have started a savings account to help you avoid this situation in the future. It’s very probable that you ended up in debt, because some costly expense arose from an unexpected emergency. Whether it was a home repair expense, a sudden medical condition, or car failure, something forced you to borrow money that you couldn’t afford. Putting away just 1% of your pay will help you build up a small emergency fund. As you pay off each debt, you can also contribute the money you would have paid to that creditor, so your savings account will continue to grow exponentially. In this way, you’ll be building wealth instead of exposing yourself to more debt.
Even though your debt may seem too vast to manage, these suggestions can help you get it under control. As this list suggests, there are many organizations and professionals who can help you get your financial situation resolved. As you begin to take advantage of these opportunities, your efforts to eliminate your debt may also reflect positively on your credit score. Overall, resolving your debt will help you build a more financially stable life for yourself.