It’s an indisputable fact: Americans love to spend money. Unfortunately, Americans tend to love to spend money they don’t have, which means the average person in our country holds over $6,000 in credit card debt and $24,000 in non-mortgage debt. And that’s not including student loans. Suffice to say that most people in 2020 are facing a mountain of debt and many have no idea how to pay it off.
The First Step: Identifying the Problem
Identifying that there’s a problem with debt that needs to be addressed is the first step to making positive financial changes.
The following are tactical ways that you can begin tackling debt as recommended by the Attorneys at Scura who have been helping people just like you get out of debt. Consider implementing these suggestions as you craft a plan to get out of debt this year.
1. Pay off debt using the debt snowball method.
The debt snowball method has been made popular by financial gurus like Dave Ramsey. The idea is that you list your debts, smallest to largest and then throw as much money as possible at the smallest balance. Then, once you’ve paid that loan, take the money you were putting towards the smaller loans towards the next largest one.
The debt snowball is so effective because it’s the best way to rapidly see progress as you pay one loan after another. This, in turn, helps you get more motivated and stay the course in paying off your debt because you’re actually seeing results.
2. Cut your expenses by a lot.
When you begin paying off debt, it’s wise to cut down expenses dramatically. Look at all of your expenses and cut out all the extras or things that are “wants” and not “needs”. Remember that this step is temporary. The more you cut, the greater progress you’ll make in reducing your debt in a shorter period of time.
3. Increase your income.
Sometimes people don’t have a debt problem, they have an income problem. Pick up a seasonal job in retail or landscaping, for example. You may even be able to work towards a promotion at your current job. Yard sales and garage sales help bring in a bit of extra cash that can go towards debt. In addition, a side hustle can be a great way to enjoy a hobby while making a steady stream of additional income.
4. Write a budget and stick to it.
Try using a bare-bones budget, which is a budget that requires you to reduce your expenses to only what you absolutely need. You live on only what you need and nothing more for as long as possible. It can be difficult, but it can definitely help you prioritize expenditures and learn how to “do without” so you can make greater progress with debt.
5. Make extra payments on debt.
No matter what kind of debt you’re trying to pay off, if you only pay the minimums, it will take you years perhaps even decades to pay it off in full. Paying extra payments, even if they aren’t large, will help you knock out debt faster. A side hustle, cutting expenses, and a budget can help you find extra money for additional payments each month.
6. Get a lower interest rate.
For loans that have a particularly high interest rate, it may be wise to either negotiate the interest rate down or find some other way to reduce the interest rate. This can reduce the amount you’re paying over time and save you money.
Other options for reducing interest include a balance transfer (when you move a balance to a low or no interest account offered periodically by different banks or credit cards) or by refinancing your loans altogether.
You Can Do It
Paying off debt is certainly not for the faint of heart, but with a little discipline and focus, it can be done. Doing so will give you financial freedom and will undoubtedly pay off in the long run.
Written by John J Scura III, Esq. Partner, Scura, Wigfield, Heyer, Stevens & Cammarota, LLP
John has been Certified by The Supreme Court of New Jersey as a Civil Trial Attorney. Whether it is a personal injury case, bankruptcy case, litigation case or other type of matter, John wants his clients to participate in the decision making process toward solving their problem in the best way possible.