The COVID-19 pandemic caused many uncertainties as it relates to finances and money. It’s possible you felt a pinch and have now racked up unexpected debt you want to pay down.
Too much debt and trying to figure out a way to pay it off can be overwhelming and frustrating. Take a deep breath and make a plan that will help you eliminate debt from 2020. Here are a few tips to help you pay down debt and find financial freedom once again.
Avoid creating more debt
It may seem obvious, but it’s worth stating: a wise approach that will help you eliminate debt from 2020 is to stop creating more debt. Your objective is to avoid your debt getting worse and to focus on what you owe already. Take a break from using your credit cards and start living within your means. The more debt you create the harder it becomes to begin paying it off.
Live as frugally as possible and start shopping smarter by couponing and making a grocery list before you head out. Learn to tell yourself no, or better yet, “not yet” and to sleep on it before you make large purchases. While buy now, pay later is a common approach to spending, do the opposite: save now and buy later. You’ll be able to enjoy whatever it is you are saving for even more because you won’t have a dark rain cloud of increased debt looming.
Apply the debt-snowball method
The debt-snowball method is a debt repayment model that focuses on repaying your debts (excluding your mortgage) in order of smallest to largest. Your goal is to build momentum as you pay off debt.
To apply the debt-snowball method, you work on paying off a balance and then you take the funds you had previously allocated to your smallest debt and put them toward the next-smallest balance. What you’re doing is “snowballing” and building your repayment toward the next balance. You should plan to repeat the process until you are debt-free.
Put more money toward your payments
Another best practice when trying to pay down debt from 2020 is to increase your monthly payment amounts. Paying the minimum balance each month stretches out how long it’ll take you to pay off your debt AND it’ll cost you more in interest over time. If you have several high outstanding balances on your credit cards, then focus on making larger payments toward one each month.
It may help you to create and follow a budget to see how much you want to put toward your debt. Also, consider bringing in more income by selling items from your house or generating money from a hobby or skill. A part-time job may be the way to go if you need extra cash in your pocket fast.
You may also come across ‘found money’ throughout the year, such as getting a raise, an inheritance, or a bonus at work. It’s an excellent way to pay off student debt and could go a long way in helping you to become debt-free more quickly.
Find other things to do
Spending money is necessary for some instances but not all. You have choices and the choices you make will impact if you’re able to pay down and eliminate your debt from 2020. Whatever your temptation is for spending and using your money, it’s best to avoid it at all costs when you’re trying to pay down debt.
It may be that you have to change your routine or your hobbies right now, and that’s okay. Love online shopping? Try putting things in your cart and saving them for later. It’s the digital version of window shopping!
Find a way to lower your rate
While many credit card companies may not want to budge when it comes to interest rates, it’s always worth asking. If your credit card or loan debt is through Verve, contact us at 800.448.9228 to discuss options.
You now have some useful tips and tools to help you better understand how to get out of debt. If you are still dealing with financial burdens from 2020, click here to read tips for managing debt when times are tough.