Tips for Getting Out of Debt Faster

Posted on: 15 January 2021

Are you drowning in debt? If so, you are not alone. Many Americans have more debt today than ever before, but you do not have to stay there. You can get out of debt, but you might need to make some life changes and sacrifice some things. If you need help with this problem, you can speak with a financial planner. Financial planning services help people create budgets, plan for retirement, and get out of debt. Here are some tips a financial planner might suggest to you.

Start by Listing Your Debt

The first thing you can do is to create a list of your debt. Your list should include every debt you have and the amount you owe. You might want to list other details about the debts too, such as the creditor's name, payment schedule, and due date. Having this list is the start to getting out of debt faster.

Write Out a Budget

Next, you can write out a budget. The best way to do this is by listing your monthly income first. After that, write down your fixed expenses that you must pay each month, not including your extra debts. For example, write your rent or mortgage payment, car payment, utility bills, insurance, and other fixed expenses. You can also include a category for groceries, gas, and miscellaneous expenses. When you complete this list, deduct your fixed expenses from your income to determine how much money you have each month to use toward your debt.

Create a Plan for Repaying the Debts One by One

The amount you have for debt is the amount you can use to create a plan for repaying it. You might want to start by paying off the smallest debt first. If you divide your total debt by the monthly amount you can use to repay it, you will see approximately how many months it will take to become debt-free.

Increase Your Income Temporarily

To accelerate your plan, a financial planner might suggest increasing your income temporarily by taking a second job. If you can increase your income by $500 a month, for example, you could become debt-free much faster than if you did not change your income.

While you can save some money while working on a debt-repayment plan, it is usually better to pay off debt before starting a savings plan. If you need some additional help with your finances, contact a financial planning firm today.