Paying off debt once and forever

It doesn’t matter how you got here: be it by taking out a few loans or juggling several credit cards. All that matters is that you absolutely can get out of the debt prison on your own. Well, unless you count the help this article has to offer ;)

Figure out how you got here in the first place

Before we start planning for your assault on debt, we need to figure out how you managed to get yourself into this financial pickle. Unless we take that X out of the equation, you’re bound to be getting the same result. Apart from the unforeseeable Acts of God, there are usually 2 major reasons why people go into debt:

Reason #1: You’re not making enough money. Clearly, no one in the right mind would object to getting paid more. However, if your situation is so dire that you’re forced to choose between paying the electricity bill and buying seasonally-appropriate footwear, it’s time to start looking for additional sources of income.

Reason #2: You’re a careless spender. Now, it’s a different story when you’re making quite enough, but still, it’s never...enough for you. Be honest: do you have a soft spot for a certain coffee-brewing Mermaid? Do you call Uber to go to a park for a walk? Make a habit out of taking down your daily expenses and you’ll patch up the black hole that devours your money in no-time.

Now that we’ve tackled the reason for your debt, let’s launch a full-blown attack on it.

Prioritize and analyze

If you have more than one debt weighing you down, it’s time to prioritize them. It may surprise you, but size doesn’t matter in this instance. Neither do the loan shark’s threats (although we hope it doesn’t get to that). What matters is the interest rate.

Try prioritizing the loans with the highest interest rate, because those can and will lead to significant overpay in the long run. However, the opposite approach is not without merit either. If feeling capable of kicking some small-debt butt boosts your confidence — more power to ya!

Paying off multiple debts

Suppose you have 2 credit cards that need to be paid off. Trying to cover that debt by making the minimum required monthly payments is like chasing after 2 birds with NO stone in your hand.

Those monthly payments were designed to drain you of your money by prolonging the time you’re paying the interest

Instead, try the method described by Robert Kiyosaki in his bestselling book «Rich Dad, Poor Dad». Here’s how it works: you work out an amount you’d be comfortable paying each month in addition to the minimum payments and dedicate that amount to one of the credit cards. As soon as the outstanding balance is covered, you move on to the next card. Only this time you’d be depositing that extra bit plus the minimum payment you used to pay on the first card. Your monthly expenses remain absolutely the same, while «the birds» are getting into your cage one by one.

Make debt your top priority

Let’s face it: you can’t pay off debt if you’re only using the money leftover at the end of the month. You need to make debt your number one expense as soon as you get your paycheck. Yes, it does hurt. And yes, these restrictions can cramp your style. But isn’t it a relief to feel like the responsibilities have been taken care of and you’re done for the rest of the month?

Tap into your hidden resources

Are you sure you’ve exhausted every financial resource at your disposal? Well, how about those tax returns? And isn’t it time to put that kitchen blender you never use on Craigslist? Even if it seems like each of those sources of revenue are but drops in the ocean, together they can form quite a stream.

Don’t reach for a trump card

Don’t trust the Big Name Banks when they tell you can get rid of one credit card debt with another card. Be wiser. If you’ve exhausted all other options, consider a bank installment loan: the interest rates on those are usually lower than the ones offered for credit cards. In any case, do your homework and double-check the terms (including the fine print).

And the last bit of advice. Don’t think of your debt as a curse and an unbearable burden that doesn’t let you live your life to the fullest. It is but a price you pay for the priceless lesson in managing your personal finances in a more efficient way. And who knows, maybe once you’re free from debt, you’ll even be able to afford more than you could before. Only this time, interest-free.