Debt can have a toxic effect on your life. You feel the effects when you’re deep in debt. And that feeling follows you wherever you go. If you’re tired of that constant drag, it’s time to do something about it. These are some heavy-duty solutions for taking care of $10,000 or more in debt.
Create an Air-Tight Budget
Budgeting sometimes gives off the impression that it’s something for people who are just starting out financially. The idea of using a budget can feel kind of elementary—like something you have to do for a home economics class.
But budgeting is the real deal, especially if you’re dealing with a lot of debt.
When you build and stick to a budget, you’re able to see exactly where your money is going every month. You’ll want to start out with tracking all your income and expenses. These two overarching categories can then be broken down into more subgroups. For example, it can help to distinguish between fixed and variable cash flow. You might also want to divide your costs by type (utilities, food, entertainment, etc.)
Budgeting is easier than ever now because there are so many apps out there to help. Simply downloading a budgeting app to your phone can save you time and money.
Stop Using Credit Cards
Credit cards are one of the trickiest forms of debt. In theory, credit cards can be a convenient way to pay for things that allow you to get rewards or cashback for purchases. But like many things in life, the theory doesn’t always match up with reality.
Statistics from the Federal Reserve show about 15 percent of families spend more money than they bring in on a monthly basis. Credit is the vehicle that allows for this to happen. When you take on debt through a credit card and don’t pay the balance off in full, you’re going to end up paying a large amount of interest. Not only can this keep you in debt longer, but it can also actually increase the amount you owe if you’re only paying the minimum.
It’s wise to avoid credit cards is you’re struggling with a lot of debt. They provide too much ease of spending, which can lead to overdoing it. Plus, you’ll be stuck having to pay interest on all those purchases you don’t pay off right away.
Some people might consider doing a credit card balance transfer. This is where you take the balance from your high-interest credit card and move it to a different one with a low- or no-interest introductory rate. Doing this can give you some time to pay down your debt without accumulating interest. However, there’s typically a balance transfer fee to the tune of three to five percent of the balance. Only try this if you see a clear path to paying off the debt in a timely manner.
Consider Debt Relief
Debt relief is a good option to consider when you’ve tried several things on your own but hasn’t been able to get out of debt. The first step is typically talking to a credit counseling agency, which can provide you with some free resources. After that, you might find working with a debt relief company is your best route for eliminating your major debt.
Companies such as Freedom Debt Relief have helped many people eliminate their draining debt issues. Some people can even get out of significant debt in as little as 24 to 48 months when using these programs. Working with experts can give you an edge when negotiating with your creditors to get out of debt, ideally for less than the original amount you owed.
Use a Repayment Strategy
You’re not going to overcome your major debt by randomly throwing money at it and hoping it goes away. While that might work for a small amount of debt, bigger sums require more concerted efforts. There are two main attack strategies for debt repayment: the avalanche and the snowball methods.
The avalanche makes the most sense from a math standpoint. This is where you focus as much as possible on your highest interest rate debt while paying the minimum on the others. Then you move down the line. Doing this can get you out of debt the fastest while paying the least in interest.
While the avalanche makes sense from a logical standpoint, the snowball method has been shown to be better at getting people out of debt. With the snowball, you pay off your smallest balances first, regardless of the interest rate. This strategy gives people a psychological boost, as getting a win right away can inspire you to keep going.
Debt can be a tricky thing to navigate. With strategic planning, it’s entirely possible to systematically eliminate $10,000 or more in debt.