A Project Has The Following Cash Flows Year 0 Getting Rid of Your Debt Quickly… And What to Do When You’re Free

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Getting Rid of Your Debt Quickly… And What to Do When You’re Free

One research estimates that each American owes more than $7,000 on their credit cards alone, and the average total credit debt per person is more than $15,000. Furthermore, every college graduate already has a debt burden that exceeds $35,000 upon leaving college. Do the statistics surprise you?

Most of you are thousands of dollars in debt. And every month, you pay interest on the borrowed money—interest that adds up over time. So why not pay off all debt as soon as possible? Once debt free, you will not have to pay any monthly payment or interest amount.

Feeling difficult? How are you going to pay off your debt? Although difficult, if you are determined, you can take better control of your financial situation. We’ll share with you some amazing tips that will help you pay off your debt faster, and we’ll talk about what to do once you’re debt-free.

1. Pay more than the minimum amount

Here’s a tip that applies to your credit cards, student loans, and other personal loans. When it comes to credit cards, the average balance of any person is around $15,000 as we mentioned in the beginning. If the APR is 15%, that means the minimum amount owed to the bank is only $625, which you will pay back in about 13.5 years. Isn’t that too long? Also, don’t forget, if you continue to use your credit card for other purchases during this time, it will take you longer to pay off the borrowed amount.

Rather than paying the minimum amount, your monthly payments should be as large as you can afford. This will help you save thousands of dollars in interest and allow you to pay off your loan faster. But before you use this tip, check with your bank and make sure there are no prepayment penalties.

2. Try the snowball method

A popular strategy for paying off your debts is the snowball method, which is again based on paying more than the minimum monthly amount. List all your debts starting with the smallest, which you will tackle first. Use your excess funds and pay more than the minimum amount for the smallest loan. For your other large loans, you’ll still pay the minimum amount.

Now that you’ve paid off the smallest loan, you can move on to the next loan on your list and start paying more than the minimum amount for that loan. This way, you can continue to pay off all the loans one by one. As your small balance disappears, you free up more dollars that can help you pay off your larger debts more quickly. The basic goal is to use all of your extra money toward the loan, starting with the smallest amount, until you pay it all off.

3. Try to increase your income

How many sources of income do you currently have? If you only work one job, how about engaging in other part-time businesses or activities to earn more money. Doing so will give you more control over your finances, making it easier for you to become debt free.

Think about your strengths and see how you can use them. Create an account on a website like Upwork, where you can work as a freelancer in a variety of industries. And even if you’re not a technical maestro, that’s totally fine. You can still babysit someone, mow the yard, or take a cashier job at the local store. So earn some extra money and use it to pay off your debt. And once again, do this in the snowball way we’ve already discussed.

4. Create a bare bones budget… and stick to it

One of the best and most effective ways to pay off your debts is to reduce all your expenses and spend only on what is necessary. As difficult as it may be, it’s a quick way to get out of debt and is definitely worth the effort to improve your financial situation.

You can create a bare bones budget that will allow you to minimize your expenses as much as possible and live on the bare essentials. Since you all have different needs, your bare bones budget will also be different. But a common thing is that the budget will be devoid of luxuries like eating out or going to the movies. Avoid all unnecessary expenses and use safe amount to pay off your debts. By the way, when you are debt free, you can adjust your budget and increase your spending, but only as much as your income allows you to. Don’t take too much debt to fulfill your lust and desire.

5. Sell the things you don’t need

An easy way to get some quick cash that you can use to pay off debt. Go through all your belongings and keep aside the things you really need and use regularly. Now sell everything that is left over and then use the money to become debt free. One of the easiest ways to sell items is through a garage sale. But if you are not allowed to organize in your neighborhood, you can sell online on various websites like eBay.

6. See if you can get lower interest rates on your credit cards

What are the fees and interest rates on your credit card? And how much money goes into it? Generally, these amounts are on the up side, often eating up a large portion of your expenses. But sometimes lenders can lower and improve your rates, if you have a good credit history and make timely payments. So talk to your credit card provider and try to negotiate more favorable terms.

7. Negotiate your bills

Has your credit card provider not agreed to lower interest rates? Don’t worry – try negotiating your other monthly bills now. Yes, you can talk to your utility providers and they are usually willing to offer you a better deal. Start with your satellite TV and cable service provider as they are usually the most willing to negotiate. Prepare yourself for the meeting, find out about the rates offered by other service providers and then make your case. What if it doesn’t work? You’ve done your research yet, right? Switch to a provider that offers lower fees for the same package. You can negotiate your internet bills in a similar way. And by the way, combine your internet and TV bills if you haven’t already, as you can get better rates when you choose the same provider for both. Try to negotiate your medical bills, insurance premiums and rent.

8. Consider a balance transfer

Another strategy you can try is if your credit card provider won’t agree to lower rates. Balance transfer options are quite common, and if you do some research, you can even find an option that lets you take advantage of 0% APR for around 12 or 15 months. There may be a small fee involved, usually around 3% of the amount transferred, but it’s still a good option. In the long run, you get to save money that you can use to pay off your debts sooner.

9. Consolidate your debts

Debt and Credit Consolidation or Bill Consolidation allows you to simplify all your bills by consolidating all your debts into one monthly payment. Not only is the loan easier to manage, but you can also get a lower interest rate. Option for multiple loans, multiple borrowers and multiple payments can be availed. All these bills are settled through a debt management program, after which you make one payment per month for the next 3 to 5 years. When you pay off all your debts with one new single loan, you get many benefits such as lower monthly expenses, better cash flow, more savings and reduced stress. Before you sign up for any program or loan, it may be a good idea to discuss all possible loan consolidation options with a financial advisor.

10. Use or increase your bonuses

Did your employer give you a bonus or raise this year? Or maybe you got a tax refund. Whatever extra money you get, avoid spending it on any unnecessary things. Instead, use it toward your loan, paying more than the minimum amount.

11. Get rid of your expensive habit

Are any of your habits too expensive and take up a significant portion of your monthly expenses? If you are in debt, you should try and get rid of all your expensive habits. Find out how you spend money every day and then evaluate whether these purchases are really worth it.

Drinking and smoking are habits that you should definitely give up, not only to reduce your expenses but also to improve your health. If you eat out frequently, avoid it as well.

12. Avoid using credit cards

When you’re aiming to pay off your debt quickly, you should stop using credit cards altogether so that you don’t run up arrears. Sounds difficult? Keep your cards at home rather than in your wallet. If you want to use it for an emergency, make sure you pay the full amount next time so that no interest is added. Another option is to use a debit card, which funds the transaction from your bank account. You’re only using your own money so you won’t be adding to your debt.

Now you are debt free

Follow our advice and you will be able to pay off all your debts. And when you have achieved this goal, what do you do next? Here’s what we suggest.

treat

Because you truly deserve it after all your efforts to successfully reduce your expenses to become debt free. So allow yourself to relax, but don’t overdo it.

Revisit your budget

Until now, you were paying all your extra money to eliminate your debt, but now that the goal is achieved, you can use this money for something else. Feel like you’re burning yourself out at work? Then take a vacation. Or you can use the money for a home improvement project.

But whatever you do, come up with a proper financial plan. And this plan should not be based on borrowing more money. Because if that was the case, there was no point in being debt free.

Increase savings

Now that you are debt free, you may want to consider boosting your emergency fund. If your savings accounts are already impressive enough, maybe you can start saving for a new car or if you’re living in a rental unit.

Maximize your retirement accounts

How much have you saved for retirement so far? Find ways to improve your retirement plan. You can either increase your monthly contribution or sign up for a different plan.

Remember that if you increase your contributions by just 5% or 10%, they will all add up in the long run and become significant when you retire.

Consider alternative investments

Because some extra income is always desirable, right? Invest your savings in a new project or venture. You can enter real estate market, share market or any other industry. It all depends on the amount you are willing to put in. Whatever you choose, analyze the risks and create effective mitigation strategies.

Set up a side business

You can also set up a side business if you have enough time and entrepreneurial skills. Go about it properly, and if you’re lucky, you won’t need to work anymore.

Keep following our blog for more great financial advice.

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