In many of the blog postings I have written, I have discussed many money saving and budgeting tips that I have thought would be beneficial to my family as well as over families and individuals who are trying to improve their financial situation. While this one today is not really all that different, it is however meant to step up the debt-relief game quite significantly.
In particular, prior to this I haven’t really suggested specific timelines for how long it may take to become completely debt-free. Today I want to help set a goal of getting rid of all debts in a time span of 6 months. There are different approaches to dealing with debt but I thought to myself at first – could this be achieved? I sure hope so. Let’s give it try and be committed as possible to make it happen! Here are some steps and strategies that you can use to greatly reduce your debt and even have the potential to pay it off entirely.
Compile and Organize Debt
First of all you will want to revisit all of your outstanding debts and make sure you are aware of every single one as well as the specific amounts. Although you may have already done this many times before, it is still a good idea to do this again, just to make sure you haven’t missed anything. Making a list can help to keep this organized and to also help you calculate the total amount owed.
Prioritize and Determine the Debt you Will Pay First
There may be certain debts that are draining your finances and making it near impossible to make very much progress. Perhaps these debts are the largest, have the highest interest rates, or are ones that you need to pay immediately in order to avoid being sent to debt collectors or having various services cut off. In other cases, some times it is best to pay off your smaller debts first and use what is often referred to as a ‘snowball effect’. Meaning, if you start getting into a routine of paying off debt and are actually seeing an immediate result, this momentum can help you to continue to pay off your bills with higher efficiency.
Institute New Re-Payment Strategies
Even if you are already paying most of your bills each month and on time, some times some of them may be falling through the cracks and contributing to debt and poor credit. If you haven’t already, it may be a good idea to set up some automatic payments so that you won’t have to remember to pay on time and can avoid missed payments altogether. Secondly, as your debt level continues to go down, you can avoid paying higher interest fees each time.
Increase Repayment Percentage
If you are also very serious about wanting to pay off your debt in less time and meet your 6 month goal, another option could be to up the amount you are paying off certain bills, wherever you can. If you are in the position to put even 15% of your pay check or more towards your loans or credit card debts for example, then this can make a big difference in the amount you can pay off each month.
Put Savings Towards Debt Payment
Another method of making debts disappear sooner could also be to use some of your savings to pay of this debt. This can be an effective way to make more progress as well as stop having interest charges creep even higher. While it is probably not best to use all of your savings, as you will still want to keep some reserves in this account for the future, it can however be effective to use some of this money to help with your current financial situation.
Use Your Tax Refund Income to Pay off Debt
While sometimes we may have other plans in mind for our tax refund money, a trip or a shopping-spree, perhaps. However, with debt looming over you you may instead decide to use it to pay some outstanding bills in order to get out from under your debt sooner rather than later. Once again, it will help you save money on interest charges and ultimately you can pay off even more debts over the next few months.
Set Specific Budget Goals and Save Where you Can
In combination with fine-tuning your payment methods, you will also want to keep your spending as low as possible so you don’t add to your debt and make things even harder for yourself. I wanted to conclude this posting by of course once more mentioning individuals budgeting goals.
With the number you have landed on in terms of your total debt balance – this amount should be viewed as vital to the design of your current budget. Making a list of all monthly and yearly payments, including your debt levels and whom each is paid to, can help you when you strategize how you will repay your debts. As a result you will also be able to more accurately identify the areas where you can save more and the areas where perhaps you have previously been overspending.
Sticking to your budget each month and reducing your spending quite significantly can help you achieve your goal of lowering you debts and even experience complete debt-relief. In previous postings I have talked about various ways to free up money each month, such as switching to less expensive brands when shopping, as well as cutting back on certain programs and services, such as cable, phone plans and athletic club memberships.
By remaining dedicated to your plans of how you can save more, while being more conscious of how much you are spending each month and each day really – I believe you and I will both be surprised at how much more money will remain in our accounts. That being said, this is money that can be used to pay off more debts and help us get to where we want to be, financially-speaking in only 6 month’s time.