Debt is like a disease; it starts small, but causes major damage as it grows. In fact, 1 out of 3 adults in the U.S. has debt in collections according to an Urban Institute study. Because debt is so prevalent, more people turn to short-term loans just to cover additional monthly expenses. If you’re in debt and need help, you can get on the road to recovery in less time than you think. Here are five ways to pay off your debt and turn your financial picture around.
1. Learn how to budget.
Use this equation: household income – monthly expenses = your savings. This formula is basic budgeting, and it’s a good start for figuring out what you make, what you owe and how much you can save each month. If you owe more than you make, there’s a problem, and you’ll need to cut back on unnecessary expenses such as premium TV channels, brand name products and dining out.
2. Stop charging.
It sounds simple, and that’s because it is. By continuing to use your credit cards, you’re worsening your debt problem. It’s time to say “no” to more spending and “yes” to more saving. You need to focus on what you owe and develop a plan to pay off the debt.
3. Pay off the debt with the highest interest rate.
If you have more than one debt, list them all out in the order of their interest rates. Whichever debt has the highest interest, pay it off first. Interest increases the total amount of what you owe, so the sooner you can pay that particular debt back, the less you’ll owe in the end. You can also lower your interest rate by moving your credit cards to another bank and transferring the balance.
4. Use the debt snowball method.
Instead of paying off the debt with the highest interest rate first, you can pay off the loan with the lowest balance. Create a list of all your debts in the order of the lowest balance, and make the minimum payment on each debt. Afterward, pay a bit extra each month on the lowest balance until it’s payed off. Using this method gives you a satisfactory feeling of paying off a debt sooner, and will motivate you to keep saving.
5. Create an effective spending plan.
Write down all the expenses that you have for the month; the list should include your bills, debt payments, pizza funds and everything else. Rank the expenses in the order of their importance, and decide which expenses help or hinder your financial freedom. Allocate certain amounts for necessary expenses, and stop paying for things that you don’t need. However, it’s always good to treat yourself every once in a while – be sure to plan that out, too.
By paying your debt off faster, you are making an effort to live a life with much less stress. Stay on top of your money with these five tips from Quik Pawn Shop and get started on the journey to a more enjoyable lifestyle!
For nearly 40 years, Quik Pawn Shop has been a regional leader in providing affordable credit solutions to customers across the southeast looking for a convenient and confidential way to meet their needs. Getting a handle on your money takes time, and Quik Pawn Shop understands. If you’re in a jam and need immediate help, any of Quik Pawn Shop’s small personal loan options may be just what you need to get you going in the right direction.
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