Every year, hundreds of thousands of people find themselves struggling to eliminate their debt. Or just to pay their debt off in the first place. But these people can eliminate all their debt. So what are the 15 ways to eliminate your debt?
However you get into your debt in the first place, whether through student loans, your mortgage, or your car, it is crucial that you eliminate your debt in order to build wealth.
This is such a simple concept, yet so many people fail to do this. They aren’t even investing their money, they’re wasting it. You cannot be the same.
What are the ways that you can eliminate your debt?
Eliminating your debt is quite simple in many regards, yet so many people struggle to do it…
15. Stop loading on more debt
Whilst this may seem rather simple, and even quite logical, you wouldn’t believe how many people do this. They try to get themselves out of debt, yet keep taking out more short-term loans, or a new auto-loan, or a new phone contract.
This is preventing them from eliminating their debt, as the more of it they get rid of, the more is added back in. Take it how a friend of mine once said:
Imagine that you’ve got a big pot of cookies. You really want to get to the bottom of the cookie jar in order to get something of great importance to you.
With one hand, you are reaching in and grabbing the cookies to eat them, but with the other hand, you are pouring more freshly baked cookies in. It just doesn’t make any sense!
If you can’t resist the urge to keep getting new lines of credit, freeze your credit. It is only as simple as taping your keyboard a few times, and clicking on some buttons!
14. Build a debt cushion
By this, I don’t mean build up a nice cushion of debt that you can sit on (that’s what the bank and lenders want). I mean, build up a safety net that you can use, if you fall on hard times.
This may seem counter intuitive when you think that you are trying to get out of debt quickly. But a safety net will prevent you from being forced to take on further debt, as you’ll be able to live off your safety net rather than a new loan.
Ideally, you’d have enough money saved up for between 6 to 12 months of living expenses (living as you would normally). However, for now focus on saving little by little, and as often as possible, with the goal of getting $1000 by X date.
13. Ask your lender for lower interest rates
You may be worried to do this, in case your lender says no, but this is the precise reason why you need to do this. This can be the best way to eliminate your debt for good, there’s only one downside: You need good payment history.
If you have a good payment history, you can often try to negotiate a new (lower) interest rate. Your call will probably go something along the lines of this:
You: Hello, I am looking to sort out the repayment of debt for the account ending XXXX.
Bank Employee: Hello sir/madam, of course, please allow me to ask you your security questions in order to safeguard your account.
(Asks personal/security questions)
Bank Employee: Thank you very much sir/madam. I can see your account is in good standing with us here at (insert bank name). May I ask how you wish to sort out the repayment of debt for this account?
You: I have been looking at my recent bank statements, and I’ve noticed that my interest rate is X%, yet my account is in good standing as you’ve said. I have noticed that your competitor (insert name of rival bank) offers an interest rate of X%, which is lower. Can you match this?
Bank Employee: I’m not sure, let me talk to my supervisor.
They then put you on hold and talk to their ‘supervisor’.
Bank Employee: Ok sir/madam, as you have such a good standing account, my supervisor has allowed me to offer you the lowered rate of X%. Would this work for you?
This is where you can either haggle to try and get it lower, or you can agree there and then.
12. Target specific debts and pay them off now!
If you’re like most people, you likely have more than one debt. Different debts, even if it is issued by the same financial services company, can have different interest rates.
Look at these debts and work out which one has the highest interest rate.
Once you’ve done that, you can go hell-for-leather on paying off the higher-interest debt first. Eliminating high-interest debts are the best way to eliminate your debt entirely!
Once you have eliminated one of your debts, you can focus on the next, and next, and so on, until you eliminate your debt!
11. Increase your payments
If you are paying the minimum amount of money you need to on your debt, it will take you forever to eliminate your debts. But increasing your payments, above the necessary payment amount, that will allow you to pay off your debts quicker.
If you pay the minimum amount you are required to, it also leaves you to pay the amount of money due to the amount of interest accumulated. If you increase your payment to above the minimum, you end up paying less as a result, which benefits your wallet as a whole.
This can also be done at the same time you are doing our #12, in order to eliminate your debt much faster.
10. Use debt counsellors
You may not want to, but trust me, it is far better to use them now, than in 5 years time.
A typical debt counselling agency will create a debt management plan that lasts between 4-6 years. These people are legally bound to look after your best interests, and help you to eliminate your debts!
These agencies tend to take control of your payment plans, negotiating a lower interest rate, and minimum payment for all debts you may have.
9. Start a side hustle
Start your own business. It doesn’t have to be big, but any money is better than no money. When you start your own business, it allows you to earn some extra money from something that isn’t your job.
This extra income help you eliminate your debt.
This side-hustle could be anything, whether it’s a blog, arts and crafts business or something entirely different.
It doesn’t even need to be a typical business. The business could be done over an app such as: Fiverr; Upwork and TaskRabbit.
8. Get a part-time job
If starting your own business doesn’t appeal to you, a part-time job might be for you. This would allow you to earn extra income, which you can use to eliminate your debts.
Even seasonal jobs are available. Over the summer, jobs such as: Lifeguard; landscaper; and resort worker are all potential jobs. Over the winter, jobs such as: Dog walker, store worker, and hotel worker are all potential jobs.
Each new season can bring a new job, which can vary in income. Each season, you can eliminate your debt!
I know that this is something my friend did. He was in roughly $120,000 worth of student loan debt. Each season, he got a new seasonal job. In only 6 years, along with working his regular job, he was able to eliminate his debt. And he believes that you can eliminate your debt too!
7. Drop your expensive habits
You’re trying to eliminate your debt, but you are splashing out thousands on a habit. Whether its drinking, smoking, shopping or whatever, you need to stop. It will be difficult. But you need to stop in order to eliminate your debts.
Your expensive habits are killing your wallet, and taking money you would’ve spent on your debt, and wasting it.
By dropping your expensive habits, you are allowing yourself to increase your disposable income. This is income that you can spend on getting rid of your debt.
Even things you may consider to be menial are probably harming your wallet. Your daily coffee, or your daily shop at the cafeteria are all hampering your ability to eliminate your debts.
6. Sell everything (at least what’s not bolted to the floor)
If you don’t use it, sell it. Now, more than ever, is it easy to sell your unwanted junk. Remember the old saying “One man’s junk is another man’s treasure.” This is the same mentality.
Apps such as eBay and Facebook allow for you to connect with buyers all over the country or the state! But usually, especially with apps like eBay, you have to pay a commission.
If your local area allows you to, throwing an old-school garage sale might be the best thing to do. This (usually) eliminates all commissions associated with selling your unwanted junk.
Obviously, you will need to check with your local authority to avoid any problems.
5. Live on a barebones budget
If you really want to eliminate your debt, you need to cut all of your expenses. If it is not a necessity for survival, you don’t need it. No need to waste your money on it.
Reduce all of your spending to only what you need.
A barebones budget is devoid of any luxuries, such as cable TV, restaurant meals and going to the theater.
Whilst you live on your minimalist budget, you should be able to pay a lot of money to help eliminate your debts.
After you have finished paying off your debt, you can add luxuries back into your budget. A barebones budget only has to be temporary, not necessarily something that you carry for the rest of your life like Ronald Read.
4. Use ‘found money’ towards your debt
Throughout the year, you likely find money you never knew you had. This doesn’t necessarily mean the odd dollar you find in your coat pocket. But it can be.
Usually, found money is something like a raise or a bonus from work.
Instead of using them to pay for unnecessary goods, use it to help eliminate your debts.
This money can seriously help you. The average bonus pay in the UK is £2,200 ($2,950) according to ONREC. That is an extra $3000 (almost) that can go towards paying off your debt!
These extra dollars can sometimes take off huge chunks off your debt total. This means that you are potentially knocking off several months of being in debt by using that money to pay off debt.
3. Stop investing
For those of you who know me, I am a passionate investor. I always believe that you should have as big an investment portfolio as you can. But if you have debt, you need to pay that off first.
The average stock return is 7%, and the average real estate return is 10%, yet the average APR is anywhere between 4% and 20%!
This means you could potentially see losses of 13%. I could always recommend that before you start investing, that you eliminate your debt in order to free up as much investment capital as possible.
I would always recommend investing in your own hand-picked stocks, instead of a 401(k).
2. Get rid of your car
If you currently lease your car, you need to get rid of it in order to eliminate your debt! Your car is a drain on your wallet! Not to mention your aspirations to be debt-free!
On average, in the US, car payments are $523! If you want to eliminate your debt, you need to get rid of your car. Your debt repayment needs that extra $500!
You can easily buy mechanically-sound, slightly older cars for $500! That means that every year, you’d have an extra $5,500 to help you eliminate your debt!
If you had $25,000 worth of student debt, and you paid it off, just from the money you would’ve spent on car payments, you would pay it off in only 50 months! That’s only 2 years and 2 months!
Even more if you use other methods on this list!
1. Tell your children you are on a budget
If you have children, you know that they are your financial nightmare. Your children don’t understand the concept of money. They still believe that it grows on trees in the back yard.
Telling your children you are on a budget can remove a massive headache. Your kids will now know that you aren’t going to take them to the fair, and cater to their every demand. Because you are on a budget.
Telling your kids you’re on a budget is the #1 way to eliminate your debt wholesale!
Not only can you begin to teach your kids about the concept of money, but also how to be smart with it.
When you tell them that you are on a budget, you need to be very cear with them. You are only buuying necessities, and no, ice cream at the park with Timmy is not a necessity.
No matter how much they whine, you need to use the word ‘no’ every once in a while.
How did you try to eliminate your debt? Did it work? Why or why not? Tell me in the comments!
