Almost everyone has at least some amount of debt to their name. For some, their only debt is their mortgage and a car payment. For others, their debt consists of massive amounts of credit card debt, loans, medical bills and more. But whether you have many lines of credit or just a few, it’s a good idea to create a plan for how you’ll eventually get yourself out of debt. To help you with this, here are three tips for making a solid plan that will help you get out of debt quickly and effectively.
Corral and Prioritize Your Debt
Before you can make a plan for how you eliminate your debt, you first have to know exactly what your debt situation is. To do this, Miriam Caldwell, a contributor to The Balance, recommends that you list all of the debt that you have and then rank which debts are the most important for you to get rid of first. There are a few different strategies for paying down your debt. Some people think you should pay off the smallest balance first so you can start to add that amount to larger debt faster, while others think you should pay off the debt with the greatest interest rate first. Whichever way you choose, just make sure you’ve got a solid plan that you’re going to follow.
Commit To Making Extra Payments
One strategy that you might want to consider adding to your plan for paying down your debt is to make as many extra payments as you can. Even if you just make one additional payment each year, you’ll be able to pay down your debt faster and pay less interest. According to Jeanne Lee and Sean Pyles, contributors to NerdWallet.com, you might want to commit to taking any extra money you have each month, either by sticking to your budget or through earning extra money, to pay down your debt. Sending in an extra payment every now and then, even if it’s only for a small amount of money, can make a big difference in the long run.
Don’t Forget To Save Some, Too
While paying off your debt is very important, you can’t neglect other smart financial choices while getting your debt down. So although you might want to put every last cent you have toward getting out from under your debt, Gerri Detweiler, a contributor to Credit.com, shares that you also need to be saving some money, too. If you put all your money toward debt and don’t have any cash saved, you could easily get back into debt if an emergency happens and you have to end up paying for it with credit. So to avoid this, make sure you’re saving a bit of money for emergencies while you’re working to pay your debt off.
If you have debt that you want to pay off but you haven’t quite figured out how to do this yet, consider using the tips mentioned above to help you make a plan for your financial future.