6 Steps to crushing your debt
Getting rid of high debt will take hard work, willpower, and determination. But it is doable. And, we’ve outlined 6 steps to help you start crushing debt today.
Step 1: Choose your debt-crushing method.
There are two approaches toward getting rid of debt:
- The snowball method involves paying off your debt with the smallest balance first and then moving to the next-smallest until all debts are gone.
- The avalanche method involves getting rid of the debt with the highest interest rate first and then moving on to the debt with the second-highest rate until all debts are gone.
Each method has its advantages, with the snowball method placing a heavier emphasis on achieving results at a faster pace and the avalanche method focusing more on actual savings to the borrower money in overall interest paid. Choose whichever method appeals to you more.
Step 2: Maximize your payments.
Credit card companies are out to make money, and they do this by making it easy to pay just the minimum payment each month. Beat them at their game by maximizing your monthly payments. Free up some cash each month by trimming your spending in one budget category or consider freelancing for hire and channel those funds toward the first debt on your list. Don’t forget to continue making minimum payments toward your other debts each month!
Step 3: Consider a debt consolidation loan
A personal loan from Elevate Credit Union can provide you with the funds you need to pay off your credit card bills and leave you with a single, low-interest payment to make each month. Or, you can transfer your credit card balances to a single card having a low-interest or no-interest introductory period. However, be aware that you will likely get hit with high-interest rates when the introductory period ends.
Step 4: Build an emergency fund.
As you work toward pulling yourself out of debt, it’s essential to take preventative measures to ensure it won’t happen again. You can do this by building an emergency fund. Then, start small, squirreling away whatever you can in a special savings account and adding the occasional windfall to beef up your fund.
Step 5: Reframe your money mindset.
What got you into this mess? Are you consistently spending above your means? Or, is there a way to boost your salary or significantly cut down on expenses? Even though lifestyle changes won’t be easy, but living debt-free makes it worthwhile.
Step 6: Put away the plastic
Credit cards are an essential component of financial health. But it’s best to keep your cards out of sight and mind when working to free yourself from debt. Paying your way with cash and debit cards will also force you to be a more mindful spender.
Now you have a plan. And with these 6 steps to crushing your debt, you are on your way to being debt-free! If you need a little more help, we offer Free Budget Counseling to our members. Call or stop by today and we can help you start on your debt-free path.
