strategies to get out of debt

Get Out of Debt: Tips for Taking Control of Your Finances

77% of American households have a debt of some kind or another, and 45% of households have credit card debt. These unfortunately high numbers reflect the lack of financial awareness and planning. Be it a mortgage loan, auto loan, credit car loan, student loan, personal loan, or IRS debt, if you want to get out of debt fast with strategic planning, this article is just for you. 

Here are 6 tips to take control of your finances and be debt-free. 

1. Debt Snowball & Debt Avalanche 

These are two popular strategies you can use to get out of debt faster, in case you have multiple debts. If you're following the debt snowball method, you'll focus on your smallest debt amount and try to pay it off faster. You pay a higher installment on that one, and if you have other loans, you'll pay the minimum required amount there. This is a great tactic to reduce the number of loans you have, and you also get motivated every time you clear a debt. 

Another method is the debt avalanche technique. Here your focus is to pay off the loan with the highest interest charges faster while making minimum required installments to the other lenders. This method will benefit you in the long term, as you'll be able to close down the most expensive loans faster.

2. Consolidate Your Debts 

When you have multiple debts with varied interest rates, it can be difficult to manage everything, more so if the interest rates are high. This is where debt consolidation can help you out. You take a low-interest debt consolidation loan, which you will use to pay off your existing loans. 

This can happen through a secured loan, where you offer collateral for security. In case you fail to pay off the debt, the lender will not return the collateral. You might also refinance your credit card debt by shifting to a balance transfer card. 

3. Make A Budget & Follow It 

Budgeting is the key to sound financial health. When you have a proper, practical budget, and you follow it thoroughly, you can very well manage your everyday expenses, pay off debts, and still have something left with you. 

Understand what's essential and what's not, and don't make impulse purchases. If needed, live below your means for the time being, and use the extra savings to pay off debt. When you have the burden of a loan, you cannot focus on saving and investing. So your target should be to pay off loans as fast as possible. 

4. Pick Up A Side Hustle

In times of high inflation and recession, it doesn't hurt to have an extra source of income. Take some time, note down the things you're good at, and pick up a side hustle. It doesn't have to be anything big—it should be something that makes you happy, and brings in some extra cash at the end of the month. 

With the additional income you generate, you can clear your debts faster, and once that's done, this cash flow will make sure you don't fall into the trap of debt again. 

5. Pay Off More Than What You're Supposed to 

Whether you have consolidated your debts, or you're paying back to multiple lenders, this rule applies to all cases. When you're repaying, your monthly installment includes both the principal and the interest. When your repayment tenure is long, you end up paying way more than what you had initially taken as a debt. 

So what's the solution? If possible, try to pay off more than what you're supposed to, once in a few months, at least. This extra payment will reduce your repayment period, and you'll be debt-free faster. Use this calculator to understand how this method will help you save tons of money. 

6. Avoid Taking Unnecessary Loans 

In today's date, getting a loan has become seamless and simplified, which can be a big problem for people who tend to take frequent loans. Once you get caught up in the debt loop, especially credit card debt, it can be expensive and difficult to come out of it. 

Using your credit card the right way indeed builds up your credit score. But when you miss your repayment deadline, not only your credit score goes down, but you also begin to accumulate interest on the pending payment. It's not a financially healthy choice, so try to stay away from unnecessary loans as much as possible.

With expert consultation, you can let go of your debts faster, and give a boost to your financial health. Get in touch with our professionals at Accountants Now, and find out a solution that works the best for you!

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