Are you one of the millions of Americans who are struggling with debt? You’re not alone. According to a study by the Federal Reserve, as of 2016, American households collectively owe more than $12 trillion in debt. However, there are several ways to cut debt.
Here are six creative ways to pay off debt faster and fix your finances.
1. Get A Loan
You can save on interest from your debt by getting a loan to pay it off. However, it’s only a good option if you get a low-interest rate and can make the payments.
Compare different loans and shop around for the best rates before deciding. For example, your best option is taking a debt consolidation loan to cover all your debts. As a result, you’ll only have one payment to make every month.
It can be helpful if you have multiple debts with different interest rates. By consolidating your debts into one payment, you potentially save money on interest and make it easier to keep track of your payments.
2. Create A Budget
Create a budget and stick to it. It can be a difficult task, but it’s important to know where your money is spent. Track your spending for a month, and then figure out where you can cut back. You may be surprised at how much money you’re wasting each month.
Once your budget is in place, follow it as closely as possible. For example, if you allocate $100 a month on entertainment, stick with it and don’t go over your budget.
It can be challenging to stick to a budget, but it’s vital if you want to get out of debt.
3. Use Cash Only
Try using a cash wallet system for your purchases if you’re having trouble sticking to a budget. You’ll likely become more aware of your spending and likely spend less.
Seeing cash physically leave your wallet and hands will make you more mindful of your spending. Once your cash wallet is empty for the month – you can’t spend any more. It prevents you from overspending on unnecessary things.
A cash wallet system is a difficult method to stick to. However, it can help you get out of debt.
4. Debt Snowball vs. Debt Avalanche
The snowball method of paying off debt is a rewarding way of cutting debt. It involves paying off your debts from smallest to largest, regardless of interest rate.
The benefit of the snowball method is that you’ll see results quicker, motivating you to keep going. Once you’ve paid off your smallest debt, you can use that money to pay off your next smallest debt, and so on.
Another option is the debt avalanche method, which is similar to the debt snowball method but with a few key differences. First, you’ll pay off your debts from the highest interest rate to the lowest, regardless of the balance. As a result, the debt avalanche method lets you save money on interest over time and get out of debt quicker.
5. Debt Management Plan
Consider a debt management place if you’re struggling to make payments. It’s where you make one monthly payment to a credit counseling agency, which then distributes the funds to your creditors. In addition, the credit counseling agency may be able to negotiate lower interest rates and monthly payments on your behalf.
Using a credit counselor is a good option if you struggle to make your minimum payments each month. However, a debt management plan hurts your credit score. So, it’s crucial to weigh the pros and cons before weighing a debt management plan.
6. Talk To A Financial Advisor
A financial advisor can help you understand your options and make a plan to get out of debt. The advisor can also provide support and accountability to help you stick to your debt reduction plan.
Ask your bank or credit union for recommendations on where to find a financial advisor.
Creative Ways To Pay Off Debt Faster Summary
These are just a few options to consider when trying to pay off debt. It’s important to remember that there is no one-size-fits-all solution – the best option for you will depend on your unique situation.
If you’re struggling to make ends meet, it’s essential to reach out for help. There are many resources available to assist you in getting out of debt.
Talk to a financial advisor or credit counselor in your area to get started.