Are you in a debt crunch?
If so, you probably know the stress and anxiety it can bring you and your family.
Debt is an extremely common financial situation to have. With over 95% of adults issued a credit card it can be easy to over-utilize this piece of plastic and put your financial future in jeopardy..
In this post, I’ll explore several methods you can use to eliminate debt quickly and much more. Let’s get started.
Use Side Hustles to Crush Debt
Side hustles are one of my favorite methods to reduce your debt because of how easy they can be to start.
Start by finding a side hustle that’s right for you. There are hundreds – if not thousands of potential side hustles that almost anyone can start. Finding one that you enjoy can be just a few searches away.
Once you’ve found a side hustle you’re happy with, you can use the additional income to lower your debts.
Depending on how much debt you have – this could take a few years (or more), but don’t give up.
Some of my favorite ways to flip money include driving for delivery apps, selling candles from home, flipping furniture, or working as a freelancer.
Find Other Ways to Increase Your Income
Starting a side hustle or business isn’t the only method to increase your income. Take advantage of your 9-to-5 by asking for a raise or finding another higher-paying opportunity at a different company.
If you choose to ask for a raiser – be sure to have some numbers or accomplishments to back it up. This will increase your chances of landing a higher pay.
If this is not an option for you, switching companies or industries can be an easy way to increase your income. By finding a similar job at a different company it’s possible to increase your pay anywhere from 10% to 20%.
Reduce Debts with the Highest Interest Rates First
While there are two main methods of paying off debt – the debt avalanche method and the debt snowball method – I prefer the avalanche method.
This method of paying off debt will reduce the total amount of interest you will end up paying.
If you want to become independently wealthy – you’re going to need to save as much money on interest as possible. To organize your debts, create a spreadsheet that includes the type of debt, the total amount owed, the interest rate, and the minimum payment each month. This will help you to better track which debts are getting paid off and which debts are accruing the most interest.
Take Your Budget Seriously
There’s no doubt that budgeting your money correctly can help you to pay off debt much more aggressively than those without a strict (or any!) budget.
By budgeting your money you can make better decisions with your money to help you reduce debt at a quicker rate.
How do you budget effectively?
Creating a balanced budget will require you to understand both your monthly income and expenses. To start your budget, write down all of your monthly income. Next, write down all of your monthly expenses – like your mortgage or rent payment, minimum debt payments, and other expenses like your utilities or groceries. Subtract your expenses from your income to gauge where your finances stand. If you are at a net loss, you’ll need to either find ways to cut expenses or increase your income.
Build an Emergency Fund
If there’s one thing we all know about emergencies it’s that they will happen. It isn’t a matter of “if” – it’s a matter of when they will happen.
When trying to pay off debt, an emergency can cripple any progress you’ve made on reducing your debt.
If you want to decrease the likelihood of this happening – try to establish an emergency fund if you don’t already have one. It’s a good idea to start small – maybe $500 or $1,000 then build it up over time.
This money should be used for one thing and one thing only – true emergencies. But what is considered an emergency?
In simplest terms, think of items that are unexpected – like a major hospital bill, a car repair, or dental procedure. Items like car maintenance however – should not be considered. Any repairs or expenses you can expect should instead be budgeted for.
Start a Business
Similar to starting a side hustle, starting a business can be another great way to build your income and rescue debt.
But there’s one main caveat – don’t go into more debt to start your business.
There are many small businesses you can start for less than a few hundred dollars. For example, investing in digital real estate like a website or blog can be done for less than $20.
Small businesses can require a significant amount of work to get started – but once they develop, scaling them can become easier and easier.
Stop Using Debt Altogether
This one might seem obvious – but sometimes can get overlooked. If you’re already drowning in debt a credit card can be the worst thing for your finances. By avoiding these obvious traps it can not only help you pay off your debt quicker but also avoid it later down the road.
By using a few of the methods above, you’re sure to start reducing your debts one month at a time.
Whether you choose to pick up a side hustle, start a business, or revisit that pesky budget – reducing your debt is going to take some sacrifices and hard work but it’s certainly possible. Stick to it and watch your debt start dwindling away. Good luck!