9 Steps To Pay Off Your Debt

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Debt can be overwhelming and stressful. In fact, is one of the number one factors that drove people to depression or do make them do regrettable things.

The key is to treat debt as a journey and not something that needs to be finished by tomorrow or overnight. Be realistic and look at debt in a positive way that can change your life and you will be debt-free one day.

And being debt-free won’t come to you easily if you do not have a solid plan to pay off your debt. Getting out of that pile of debt is easier said than done.

Let’s talk about the practical ways how you can get out of debt with these 9 steps.

1. Know how much your actual debt is

Take a notepad and write down all your debts and what kind of debt it is with the interest rates. You can It is important to know how much money you owe to people or the bank.

If you have never written down all your debts, this is the time to do so. By doing so, you will even be surprised to know that you owe more than you assume!

2. Create a budget

This is very vital for your coming out of debt. I know budgeting sounds cumbersome but it’s worth it.

When you create your budget, you will have a rough idea of what you have, you will be able to track your spending each month.

This will allow you to see where you can cut off your spending and use the money instead of paying off some of your debt.

When you start budgeting, you will be able to determine:

  • How much money you earn each month.
  • How much do you spend each month on living expenses like your groceries, bills, mortgage, rent, etc.
  • How much you can actually cut off and save money. 

Here are a few ways to create your budget:

Here are 5 Steps To Create A Realistic Budget.

3. Cut off your monthly expenses

There are many ways to save money. Here are some of my favorite ways to save money:

  • Get cash back on your spending by using Ebates.
  • Cancel those subscriptions which you do not use. Like your Netflix account when you already have a similar entertainment account, magazine subscriptions, gym membership – basically those memberships which are not important and that you do not need.
  • Lower your cell phone bills and cable bills.
  • Stop buying things that are not needed.
  • Reduce eating out and cook yourself at home.

4. Stop Borrowing

The borrower is a slave to the lender. No matter how hard the situation may be, unless it is a life and death situation kind of thing, stop borrowing.

That also implies using credit cards. If you use a credit card to buy something, you are still borrowing.

Try to use cash to buy anything you need.

Remember this, if you do not have the cash to give, you do not have the money to buy it.

5. Determine which debt to pay off first

Now that you already have your debts and their type and interest, it will become easy for you to determine which one you want to pay it off.

Here is how to determine which debt you must pay off.

  • Calculate all of your debt and get the total number.
  • Decide in what order you want to pay off your debt.

I highly recommend you to read Dave Ramsay’s ‘The Total Money Makeover’. 

There are basically two different strategies for paying off your debt. The snowball method and the avalanche method.

The snowball method works by paying off your debt with the smallest balance and working your way up to the bigger ones.

The avalanche method works by you paying off your highest interest rate debt first and going in descending order.

The avalanche method will allow you to save the most money since you’re paying off high-interest rate debt first, but the snowball method will keep you motivated and inspired as your debt decreases month after month.

6. Negotiate with your creditors for settlement

This is not the best idea because this will be put up in your credit score report.

Negotiating with your creditors for settling your debt with a lower amount is advisable if your debt is too high.

The bank or your creditors will waive off some percentage of your debt for a lump sum payment.

7. Make more money

It’s not easy to just make more money when you need it! But, if you really want to come out of debt, you need to look out and find ways to make extra money.

There are so many ways to earn extra money. Some of the most common ways you can make extra money are:

  • Become a freelancer – virtual assistant, proofreading, personal assistant, etc.
  • Do print on demand.
  • Become a tutor.
  • Start a blog.
  • Start a YouTube channel.
  • Sell your talent.
  • Find remote jobs or work two jobs.

If you think you do not have the necessary skills to earn, then start learning new skills by enrolling yourself in a course.

Here are some of the Easiest ways to make money online.

8. Put any extra money toward paying your debt

The most dangerous mistake people make is when they have more money coming in, instead of working on those debts, they increase their standard of living.

Yea, it is important to improve your living condition, but you have been able to survive with that for years. So, why not put all that extra money you earn to attack your debt and become debt-free faster?

That new iPhone you have been eyeing for months can wait. It’s not going anywhere. By the time you paid your debt, there will be another model which is better than the one you want to have before!

Be very intentional about becoming debt free. Instead of spending that extra money on something else, throw that money into your debt. This will be possible if you have the determination to go faster in achieving financial freedom.

9. Start saving for the future

Now that you are debt free, work on your future financial freedom by making plans and goals by:

  • Creating emergency fund – at least 3-6 months’ salary.
  • Investing.
  • Start a business.
  • Save for something you want to buy in cash.

Have this mentality that if you are not able to pay in cash, then you do not have the money to buy it. Remembering this will make you debt-free for life.

DISCLAIMER: This post may contain affiliate links, meaning I will get a small commission without any extra cost to you – if you decided to make a purchase through the links given.  For more information, please read my Affiliate Disclaimer.

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