Getting out of debt can feel overwhelming, but with the right strategies and expert advice, you can take control of your financial future. Here are some of the best ways on how to get out of debt, backed by expert opinions.
1. Create a Budget and Stick to It
Creating a budget involves tracking your income and expenses to ensure you spend less than you earn. This can help you allocate more funds toward debt repayment.
Expert Opinion: According to Dave Ramsey, a personal finance expert, “When you make a budget, you’re giving every dollar a name. You’re planning for your money. And when you stick to your budget, you’re telling your money where to go.”
Dave Ramsey emphasizes the importance of having a detailed plan for every dollar you earn. By assigning each dollar a specific purpose, you ensure that your money is being used efficiently. This helps prevent unnecessary spending and allows you to prioritize debt repayment.
Reference: Ramsey, Dave. “How to Make a Budget in 5 Steps.” Ramsey Solutions, 2023.
2. Pay More Than the Minimum Payment
Paying more than the minimum payment on your debts can reduce the principal faster, saving on interest and speeding up debt repayment.
Expert Opinion: Suze Orman, a financial advisor, states, “Always pay more than the minimum. Even if it’s only an extra $10 or $20, it will make a difference.”
Suze Orman suggests that paying extra on your debts, even if it’s a small amount, can significantly speed up the repayment process. By reducing the principal balance faster, you decrease the amount of interest charged over time, leading to quicker debt elimination.
Reference: Orman, Suze. “The Road to Wealth.” SuzeOrman.com, 2023.
3. Use the Debt Snowball Method
The debt snowball method involves paying off your smallest debts first to build momentum and motivation.
Expert Opinion: Dave Ramsey advocates for this approach, explaining, “List your debts from smallest to largest regardless of interest rate. Pay minimum payments on all your debts except the smallest. Pay as much as possible on your smallest debt. Repeat until each debt is paid in full.”
How to Pay Off Credit Card Debt Using Dave Ramsey’s Debt Snowball Method
Dave Ramsey’s snowball method focuses on building psychological momentum. By paying off the smallest debts first, you experience quick wins that motivate you to keep going. This method keeps you focused and committed to becoming debt-free.
Reference: Ramsey, Dave. “The Debt Snowball Plan.” Ramsey Solutions, 2023.
4. Consolidate Your Debts
Consolidation involves taking out a single loan to pay off multiple debts, often at a lower interest rate, simplifying payments.
Expert Opinion: Clark Howard, a consumer expert, advises, “Consolidating your debt into a lower interest rate can save you money and make your debt easier to manage.”
Clark Howard recommends consolidating multiple high-interest debts into one loan with a lower interest rate. This can simplify your payment process, reduce the total interest you pay, and potentially lower your monthly payments, making debt management more straightforward.
5. Negotiate with Creditors
Negotiating with creditors can result in lower interest rates or a settlement for less than the owed amount.
Expert Opinion: Jean Chatzky, a financial journalist, recommends, “It never hurts to call your creditors and ask for a lower interest rate or to settle your debt for less than you owe. You might be surprised at what they’ll agree to.”
Jean Chatzky encourages proactive communication with creditors to potentially reduce your debt burden.
Creditors may be willing to lower your interest rate or accept a smaller lump-sum payment to settle the owed amount, making it easier for you to manage and pay off.
6. Increase Your Income
Increasing your income through side hustles or part-time jobs can provide additional funds for debt repayment.
Expert Opinion: Robert Kiyosaki, author of “Rich Dad Poor Dad,” suggests, “Find ways to make extra money. Use your skills or learn new ones to boost your income.”
Robert Kiyosaki highlights the importance of boosting your income to accelerate repayment. By finding additional sources of income, you can allocate more money towards paying off your debts, shortening the time it takes to become debt-free.
7. Cut Unnecessary Expenses
Reducing or eliminating non-essential expenses can free up more money to pay down debt.
Expert Opinion: Tiffany Aliche, known as “The Budgetnista,” advises, “Identify and eliminate unnecessary expenses. Every dollar saved can be used to pay off your debt faster.”
Tiffany Aliche recommends scrutinizing your expenses to identify and cut out non-essential spending. By doing so, you free up additional funds that can be directed towards repayment, helping you achieve your financial goals more quickly.
Reference: Aliche, Tiffany. “Cutting Costs to Pay Off Debt.” The Budgetnista, 2023.
Bottom Line
Getting out of debt requires a combination of discipline, strategy, and sometimes a bit of creativity. By following these expert-backed methods, you can take control of your finances and work towards a debt-free future.
Remember, the journey might be challenging, but the peace of mind and financial freedom you’ll gain are well worth the effort.
