3 Ways to Pay Down Debt Faster
Attempting to pay down debt but not getting further ahead is one of the major stressors I have seen on a person. Constantly going and not having a light at the end of the tunnel can cause burnout. Debt is one of the main factors in fights between significant others and families. This post will provide you with three ways that you can pay down debt faster to release some of the stress you are facing in regards to finances.
Use Cash
Eating out, entertainment, grocery shopping, and gas are all items that you can use cash to purchase. By implementing a cash only rule for these expenses, you can cut down on your spending drastically.
There is a psychological factor of seeing money leave your hands and being able to count the money you have left over to spend in each category. We have gotten into a mindset that we can just order online or swipe a card, but it doesn’t register to us how much we are spending.
When you are able to, spend cash in person. This allows you to stick to your budget more, and if you don’t spend all of your money for a category, you are able to put that extra money towards debt; every dollar makes a difference on your debt because it is less interest that will be charged.
Instigate a 48 Hour Rule
In a world of instant gratification, we want something as soon as we see it. This leads into things such as buyer’s remorse or us not being able to pay for groceries for the month.
By instigating a 48 hour rule where you don’t purchase the spontaneous item, you are able to ensure that you really wanted the item and it wasn’t just because it was there. The key to this tactic is to take the money you would have spent on the item and to put that money towards your debt (pending you still have enough for your necessary bills for the month).
By being able to wait and see if it is something that you want, you are able to avoid having buyer’s remorse and you can ensure that you have the money for that item.
For larger items, such as a trip or vacation, plan for the item by setting aside money each pay cheque for it. This allows you to go on the trip and truly enjoy yourself rather than fret about where the money is coming from to pay for the vacation.
By implementing the 48 hour rule and being able to save up for the larger items allows you to start to move away from instant gratification and be able to see the larger picture.
Tackle One Debt at a Time
It’s tempting to put $50 on this debt, $20 on that debt, $10 on the last debt, etc. It feels good to be making a difference on each item because there is a visible number drop on them. However, this is not helping make a bigger dent into your debt.
When you focus that $80 on one debt, you are able to reduce the amount of interest you are paying on that debt thereby the amount outstanding will be paid quicker. When you finish paying off one debt, you are able to focus your attention to another one and tackle that one in it’s entirety as well.
As a reminder though, continue to make your minimum payments on all of your outstanding debts. This will allow you to keep your credit standing and avoid your items being sent to collections. When an item gets sent to collections, it affects your credit report and the debtor can request to garnish your wages (if not paid through them). Continue to make those payments but any additional money you have, focus it on one debt and watch the debt melt away.
