How to Get Out of Debt Quickly

How to Get Out of Debt Quickly

If you’re in debt, you’re looking for ways to get out of it as quickly as possible. Sure, winning the lottery is one way, as is stumbling upon a duffel bag full of cash.

However, it’s simply not all that likely that either of those very fortunate events will come to pass. So, if you can’t expect a sudden infusion of cash to pay your debts, what can you look forward to? What are some things you can do to get out of debt as quickly as possible?

Let’s take a look at a few of the things you need to do to get out of debt as quickly as you can, and hopefully, avoid some of the unpleasantness of constantly being behind the financial 8-ball.

Take Stock

How often do you find yourself just paying your bills without really understanding what’s in them? It makes sense. Paying bills is a boring and uncomfortable process, especially if you don’t have the money to cover them all. You don’t want to take any more time than you have to.

But facts are facts: you can continue to ignore the problem and never get around to fixing it or you can face it head-on and start solving it.

That’s what taking stock means. You’ve got to understand what you’ve got and what you owe before you can start climbing your way out of debt.

So, how do we do this? First, take a look at your pay stubs and calculate what your take-home pay is every month. This is the amount of money that ends up hitting your bank account.

Then, take a look at your bank accounts and credit cards. How much is going out every month? You want to identify a few things:

  • Necessities: these are things like rent, car payments, insurance premiums and utility bills
  • Near-necessities: Here, we’re talking about gas, food, and maybe your internet package. These are things you can’t really do without, but you may be able to find something cheaper.
  • Savings: Obvious – how much are you socking away?
  • Disposable: These are all the extra charges. Going out to eat, seeing a movie, or having people come to your place.

Look through your accounts and see if you can catalog each of the charges you’ve made recently. This will help you see where your money goes.

Take a very close look at how you spend money and where it goes. You’ll need to get your hands on as much money as possible to pay off your debt as quickly as you can.

Having trouble tracking your spending? Consider using cash. Take out a certain amount of money for a specified time period, say $200 for a week. Once it’s gone, its gone.

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Choose your Repayment Method

There are two tried-and-true methods to help you pay down your debt as quickly as possible.

First, we have the snowball method. You’ve probably seen the method around and it’s very popular. In essence, you need to make a list of all the outstanding debts you have.

Then, pick the lowest balance and work to pay that off, making the minimum payments on the other debts. When that’s done, roll that new money into the next lowest balance and so on.

The big reason to use the snowball method is because it motivates you to continue to pay your debt. There is a nice psychological effect when you repay a whole account.

The second method is called the avalanche. The avalanche method says you should make minimum payments on all of your debts, but pay off the balance with the highest interest rate first.

The idea here is to save you the most amount of interest possible. The avalanche method can also save you some time on repayment.

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Increase your Income

Easier said than done, perhaps, but increasing your income can help you pay down those past due balances much faster. You could take on a second job, but that can be difficult if you’re already working a lot or have a family.

You may have to get a little creative to make this work. Think about the things you like to do. Can you write or are you good at building things?

Maybe you like to do some graphic design in your spare time? All skills are marketable and the internet has made earning a bit of extra money on the side easier than ever.

There are a plethora of websites out there that will connect you with people looking for work they need done. Just make sure you throw some of your earnings in a savings account for taxes!

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Use your Rewards

Every little bit helps, including using your credit card rewards. If you’re in debt because of excessive use of credit cards, you likely have a solid stock of points banked.

Instead of purchasing that awesome new widget you’ve always wanted, consider using the points for charges you’ve made. You could also simply get a gift card to a grocery store or other boring location that will help you reduce the amount of money you spend each month.

Take that money and throw it at your debt. Make sure you shop around, as well. Different credit card companies usually have deals with a variety of retailers. Make sure you get the best bang for your reward points.

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Talk to your Creditors

If you’re truly having a tough time paying your bills and simply need a bit of breathing room, don’t be afraid to contact your creditors. They have a vested interest in your successful repayment, so they will likely be very happy to help you out.

Your creditors will likely offer you payment assistance or interest rate adjustments. This may not necessarily help you pay off your debt quicker, but it can be the only option if you’re having to select between successful repayment and bankruptcy.

Repaying your loans come down to understanding how much you bring in and what you’re paying. Once you understand that, come up with a repayment strategy, like the snowball or avalanche method, and get it going. If you can stick to your plans, you’ll be out of debt before you know it!

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Spenser Smith

About Spenser Smith

Spenser is a finance writer living in Philadelphia, PA where he works for a financial services company, specializing in consumer credit. Spenser holds both a bachelor's and master's degree in economics.

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