We all have some form of debt that likes to haunt us from time to time. Whether it is an outstanding credit card debt that is a steady reminder on your credit report or outstanding bills that have gone unpaid, getting this debt removed is critical to your financial health. Here are four ways to work towards paying down that debt over the next couple of years and jump-starting your savings.
1. Create A Passive Income
The best way to work towards paying down debt is to supplement your income with passive income. Of course, not all income is equal, and there is the passive income option that will give you an income that doesn’t take up any of your time while supplementing your bank account each month. Passive income requires you to often invest a little bit of funding into stocks or real estate, but your money will start to work for you.
2. Strategize Which Accounts Are Paid First
If you have lingering debt, chances are there is more than one account, and it is best to tackle this debt one account at a time. While you need to maintain minimum payments on your debt, make sure you put the additional funds towards the smaller amounts first to pay them off quicker. If all of your accounts have similar balances, shift your attention to the highest interest rates, targeting them first. This will reduce the overall amount that you pay in interest. Once they have been eliminated, you can move forward to the next account, continuing that trend until the debt is gone. Your credit report will thank you for this method.
3. Consolidation Is Your Friend
You could qualify for a debt consolidation loan if your credit is still relatively good despite the outstanding debt. This allows you to take advantage of bringing all your debt together under one loan and making one single payment each month until the debt is paid. You can use this loan to pay off your credit card debt from multiple cards. A bonus is that all of your credit will go back on your credit cards, boosting your credit score and making repayment easy with it being in one place.
4. Develop A Monthly Budget
You generated the outstanding debt in the first place because your budget was non-existent or not appropriately made. As you pay down your debt, you mustn’t go back and replenish that debt, restarting the cycle. Create a budget that allows you to cover your expenses and apply a portion of your income to this outstanding debt. Remember that any supplemental income you are generating should also be applied directly to this debt. Once you have paid the debt in full, you can start applying additional funds to your savings so that you can build it up for financial stability.
Patience Is Key
Eliminating the unwanted debt over time is not something that happens overnight. There is a level of discipline and patience required to eliminate this debt and generate healthy savings after. In addition, taking advantage of multiple streams of income, such as passive income options, can give you more room to meet your goals and hopefully meet them faster. By combining all of these different tips, you could be debt-free much sooner than you think.