Pay Off Your Debt – a Quick and Easy Guide to Debt Elimination

Debts can be a pain and anyone would like to eliminate them from their life as soon as possible. It is the most common issue related to personal finances which people face in their life. In short, the answer to the problem can be summarized in very few steps. All you need to do to eliminate debt from your life is to not get into more debts, not spend more than you can afford but save money, and pay regularly using the money you save. This sounds easy and straightforward but is not. Life is complicated and many a times, we cannot do certain things which we ought to be doing. Getting out of a debt can be complicated and is definitely not easy. You need to have control over vast aspects of your life. You need to control your emotions and make sacrifices to successfully eliminate debt. You need to learn how to discipline your actions and learn about saving schemes so you can save more money. Debt elimination is not just about accumulating enough money to pay the company back but is more about saving money and making little sacrifices numerous times. You need to have conviction and a will to remove debt from your life in order to get successful in your venture of eliminating debts. Here is what you need to do to make it happen:

  • Make a list of all your debts
    • The first thing anyone who wants to clear his or her debts should do is make a list of all their debts.
    • Write down about every debt you need to pay, the interest rate at which you have to make the payment, the name and contact details of the creditor, and any other bit of information that you find useful.
  • Use a personal finance software and budgeting tools
    • There are many free budgeting tools available online and you should choose one and use it to your advantage.
    • Such tools help you keep track of your debts and develop possible plans to pay them back.
  • Involve other people
    • Involve the people who are affected by your debts and see that you pay off all your debt more easily.
    • The people you involve should be someone who contributes to the house income or manages other aspects of your life.
    • Together, you can manage your finances better and much more easily. Paying off debts is stressful which is why having someone else on board will take off some of the stress.
  • Come up with a plan to pay off your debts
    • After learning about all your debts and getting a fair idea of what needs to be done, you will need a solid plan to execute.
    • You need an approach which will tackle the problem from different sides. You can use certain tools to solidify your plan and make more concrete choices.
  • Prepare a budget
    • A budget will help you keep track of all your expenses and income. Come up with a realistic budget in which you separate out money that needs to be spent for paying off debt and use the rest for yourself.
    • A budget will give you more control over your finances and will make things much easier and better for you.
  • Use a debt repayment calculator
    • A debt repayment calculator is a painful but realistic way to look at what you are dealing with.
    • The calculator will calculate the exact time remaining till you pay off your debt if you make minimum payments every month.
    • It will be a gentle reminder about how much you should be saving to successfully get rid of your debts.
  • Order all your debts
    • According to their interest rates
      • This is important because different debts have different interest rates and those with higher ones should be paid off as quickly as possible.
      • If you focus on paying debt with the highest interest charges first, you will save interest money and will also be able to pay all of them off in the quickest manner possible.
      • List your assets too, as there should be a good balance. You might be getting payments from an annuity and you can actually cash that out and pay off your debts.
    • According to their balance
      • In this approach, you pay off the smallest balance first and the other debts follow in that order.
      • This approach is also helpful because it allows you to pay off more debts quicker and gives you a feeling of achievement each time you pay off a certain debt.
      • By paying off debts quicker in this way, you free up more cash which can be used for other debts as well as some more
    • According to the type of debt
      • In this approach, you pay the non-revolving debts first and revolving debts later.
      • A revolving debt is a type of debt which you can pay and avail again after a while. A great example would be your credit card. A non revolving debt is the one you pay but cannot avail again. These debts include car loans, home loans etc.
      • Paying non revolving debt first means you will be able to free yourself from the shackles of a debt.
    • Spend less than you make
      • It is important that you make more than you spend so you have more savings which can be used to pay off your debts.
      • To accomplish this, you can use several ideas.
        • Get a second stream of income – you can generate more income which can be used for debt repayment through a second source of income. This source can be a small job which requires little effort and is something you can do easily.
        • Save money on littlest of things – use cash back online payment schemes, 0 per cent credit cards, reward cards etc. to help you save money.