Our Top Tips for Paying Debt Down Quickly
Being debt-free has a number of benefits, especially when youâre trying to buy a home. Lower debt tends to increase your credit score, which means that youâll qualify for better mortgage rates. Reduced debt payments can increase the amount of money the bank will lend you for your home. And eliminating your debt gives you more financial freedom with your budget.
A lot of financial advice focuses on the little things you can do to get rid of debt: things like cutting out fancy coffees and not hanging out at the bar on Friday nights. These things do make a difference, but if you want to pay your debt down quickly, you need to look for ways that you can save an extra $500, rather than an extra $20. Here are a few tips that can help you aggressively pay down your debt.
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Stop Using Your Credit Cards
Itâs often easier to pay with a card than with cash, but when you use your credit cards, youâre not always accountable. It doesnât matter whether your grocery bill comes to $100 or $150 if it fits on the card. Unfortunately, this makes it harder to get out of debt. You might feel good about putting $300 towards the bill, but if you added $250 in purchases, you havenât gotten very far.
Leave your credit cards at home. If you want the convenience of a card, start using your debit card, and always make sure you have enough money in the bank to cover the charges.
Get Rid of the Rent Payment
For most people, rent is the biggest payment of the month. If youâre renting your own one-bedroom apartment, youâre probably spending at least $800. Thatâs a lot of money thatâs not going toward your debt. It may be time to suck it up and make some changes that will help you improve your financial situation.
If you can, ask your family if you could live rent-free with them until youâre out of debt. Be sure that youâre contributing in some way, such as watching your sisterâs kids or running errands for your mom. If this isnât possible, look for other ways to reduce your rent payment. Instead of paying for a one-bedroom on your own, you might look for a two-bedroom apartment with a roommate. That could shave a couple of hundred dollars off your monthly payment.
Take on a Second Job
For some people, cutting major expenses isnât possible, or it isnât enough. You can make a bigger difference by increasing your income. A part-time job at the grocery store could earn you $100-200 a week, and you may even get a discount when you shop there. If you could tutor high school or college students, you could get paid $20-50 an hour. A stay-at-home parent might be able to bring in some income by creating a home daycare.
Once you start earning extra money, itâs important to put this money toward the debt and not start treating yourself every chance you get. Otherwise, your efforts are in vain.
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Have a Garage Sale
You may have hundreds of dollars just lying around your home. Check every nook and cranny for things that youâre no longer using that could bring in a bit of extra cash, then have a garage sale. If you donât mind going through the trouble of making plans to meet buyers, you can often fetch better prices for your items by selling them on sites like Kijiji or on neighbourhood Facebook groups.
What are the things you could sell? Kitchen gadgets, clothes that no longer fit, toys, or furniture. People often hold onto things they might need or want in the future, but you have to think about the present. For instance, if youâve been holding onto baby things just in case you decide to have another, it may be time to get rid of them. You can always replace things in a few years if you need to.
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Apply âWindfallâ Payments Toward the Debt
Itâs important to not think of any big chunks of money you get as a fun bonus. Think of them as an opportunity to pay off debt. This includes things like an annual bonus, overtime pay, and tax refunds. If you get some money for your birthday or Christmas, you can still treat yourself a little, but try to put some of that money toward your debt too.
Consolidate for Lower Interest Rates
If your debt is tied up in accounts with high-interest rates, you need to look for other options. Keep an eye out for zero interest balance transfer offers. These are offers to transfer your entire balance to a new credit card that has zero interest for a certain period of time. You do need to read the fine print. Sometimes, you have to pay back interest if you donât pay the balance in full or if you forget a payment.
Another option is to consolidate the debt with a loan. In this case, youâll get a lower interest rate, but youâll have to make a steady monthly payment, similar to what would happen if you take out a car loan. People like this option because it really forces them to pay off that debt, but it doesnât offer the same flexibility you have with credit card payments.
Getting out of debt requires a lot of focus, but if youâre aggressive about paying things off, youâll be able to relax in your new home sooner.
Photo credits: depositphotos.com
About the Author:
At Sterling Homes, our mission is to provide the opportunity for affordable homeownership without compromise. Over the last 70 years, Sterling Edmonton has quickly become one of Edmontonâs most popular builders. We bring more than seven decades worth of exceptional customer service, superior design and unparalleled craftsmanship to the greater Edmonton area. As a member of the Qualico Group, Sterling Homes focuses on greater Edmontonâs finest family communities, while being able to offer some of the regionâs most family friendly prices thanks to volume purchasing power for materials, trades and land. This has not only made Sterling one of Edmontonâs bestselling, move-up builders, but also one of the industryâs most respected home providers. It is through our uncompromising commitment to our customers that we proudly deliver the Sterling Advantage â thatâs why each and every home we build includes a 10-year home warranty, a completion guarantee and new home warranty excellence rating. Our Advantage is our pledge that, when you build your dream home with Sterling, we will deliver a timely, well-built home youâre sure to enjoy for years to come.
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