Follow These 10 Tips to Get Out of Debt This Year
Getting out of debt can be painful and frustrating. But taking on the challenge is the start of your financial freedom. Do you really want to spend the next decade in debt? You can take steps to get it rid of it right this year! Here are 10 tips to get started.
1. Do not create more debt.
Stop adding to your problem. When you continue to create more debt, you will not make any progress.
2. Increase your monthly payments.
If you only pay off with minimum payments, you will end up paying double or triple what you originally charged. Challenge yourself to pay more than the minimum and take a big chunk off your balance.
3. Start building your emergency fund.
This supports your efforts to stop creating more debt. The emergency fund will be your safety net instead of your credit card in case of an emergency.
4. Get rid of one debt.
You can make more noticeable progress by making a big payment to just one of your accounts each month until that debt is completely repaid.
5. Negotiate for lower interest rates.
Contact your credit card issuers and ask for options that will lower your interest rate. If you have a good payment history, you may just be granted a reprieve.
Create a monthly budget to better manage your money. Study your budget and look for ways to cut expenses, then use the money you saved to pay your debts more.
7. Consider withdrawing from your retirement funds.
You can pull this money to pay off your debt. Weigh your decision carefully though. If you are not aged 59 1/2, some retirement plans have steep penalties. You may also be jeopardizing your retirement by tapping into your retirement plan now.
8. Cash-out on your life insurance.
Check your whole or universal life insurance. Did you accumulate some cash that you can put towards debt repayment? Study the tax consequences before withdrawing though.
9. Settle with your creditors.
If you can put together a lump-sum payment, you may consider debt settlement and negotiate with your creditors.
10. Seek help.
Getting rid of debt is not easy or simple. Sometimes you just need someone to help you out. Consider going through credit counseling to manage your debt and take control of your finances once more.