3 Major Solutions to Consider to Get Out of Debt

There was a time when credit was used either for emergencies or for those who enjoyed the instant gratification of purchasing non-essential items. With prices rising faster than wages, many people now rely on credit for many essential items, including transportation and education. The average American has $4,717 of credit card debt alone. Recent college graduates average $33,000 in school loan debt, and the average auto loan is $30,032. The prospect of getting out of debt can seem daunting, but there are some strategies that can help you achieve it.

 

Mathematize

 

The first step towards getting out of debt is to list all of your income and the debts you owe. Whether it’s best to list your debts from smallest to largest or largest to smallest depends on your personal perspective regarding delayed gratification. There are a number of great sites that can help you calculate exactly how long it will take to pay off a debt. These calculators also provide inspiration, since they also show you how much money you can save in interest charges over time by making larger payments.

Prioritize

 

Some experts advise paying off the largest debt first. Since large debts result in more interest charges over time, paying off the largest one first will save you the most money. However, the amount of time it takes to pay off a large loan can be discouraging for many people. That’s why other experts suggest paying off the smallest one first. Not only will you get to celebrate being able to cross a debt off your list, you’ll also have more money each month to put towards larger loans to pay them off more quickly. An occasional pause for celebration can make a big difference in your psychological outlook.

Economize

 

The most important factor in reducing your debt is not incurring more debt in the process. Concerts may have to be replaced with picnics in the park, and restaurant dining with home cooking, but enjoying life should be non-negotiable. Transferring your balance to a new credit card with a lower rate is another strategy that can save you a substantial amount of money. Making more than the minimum payment is another. If your budget is already stretched to the point that you are having difficulty making even minimum payments, don’t be afraid to ask for help. Banks have been known to temporarily waive interest rates for people experiencing financial hardship.

 

Financial education can be costly, so it’s important to make it rewarding. Make a list of rewards to give yourself and your loved ones in addition to the sense of accomplishment and satisfaction you’ll experience each time you cross another debt off your list. Finally, savor them.