Let’s go back to entry-level Stacking Benjamins. For the kids.
When it comes to it, you can increase your income and/or reduce your expenses. Today’s focus will be centered around effective ways to cut your expenses in today’s financial world, which will hopefully help you save some money.
Say bye-bye to high interest debt
You know we hate using rules-of-thumb, so let’s say we’re following generally accepted financial guidelines (yeah, no rules-of-thumbs here!): Any debt that you have with an interest rate exceeding anywhere from 4-6% has to go!
If you’re struggling with paying off credit card debt, you’re not alone! Pay it off intelligently – you can use the Debt Snowball method – smallest balance to largest – or the Debt Avalanche – highest interest rate to lowest. The key here is to pay the debt off and never get back in the hole.
Along the way, take advantage of opportunities to save money – anything from using coupons to save on purchases you make (don’t buy something just to “save money” with a coupon). Also, if you are carrying a balance on a card with a high-interest rate, there are several balance transfer offers available that feature 0% APRs for a year or longer,” says Scott Langdon, Analyst for CompareCredit.com.” They provide a great opportunity to pay down the balance faster, as your payment will be going to principle rather than interest.
Save up for purchases and pay with money in your bank account
While you’re clawing your way out of the hole, it’s wise to keep a cash buffer on hand for daily/regular expenses, in addition to a starter emergency fund of one-to-two months’ expenses. The key here is to cover your normal costs with cash (not credit) while you are paying down debt. Our friend Sandy Smith at Yes I am Cheap says, “Practice a little patience and save up for purchases.”
Cut expenses ruthlessly
Forego luxuries while you are in full-on debt payoff mode: make meals at home, get a cheaper phone plan that works for you, cut out the daily trip to the coffee shop (the horror!), cut the cord.
It all depends on you. How drastic do you want to get? Do you have a specific debt payoff date? What are you willing to give up so that you can live life on your own terms in the future?
Make it happen!
Debt freedom is just the first step of achieving your financial dreams. Go big and get it done! Yes, it’s going to suck, but that pain is temporary and let it be a reminder that you never want to get back into “bad” debt again.
Find your money saving mojo, get fired up, cut where you aren’t adding value to your life, and stick with it!
What about you? Any best practices to get out of debt fast? Share your thoughts in the comments below!