The 4 Ways to Tackle Debt
There is no way to sugar coat it, to reach financial independence, you have to become debt free. There are exceptions to every rule for example not paying your mortgage off right away so you let your army of dollar bills grow in investment accounts. Other than that case you should pay off your student loan and credit card debt quickly.
If you’re someone who is looking for a strategy to tackle your debt, then you’ve come to the right place. The four steps below will send you on your way!
1. Change your behavior – The first step you have to take in your journey is changing your relationship with money. If you’re someone who spends frivolously and doesn’t put a value on every dollar then that will have to change. You will need to come to the mindset of your money working for you instead of wasting it.
2. Track your spending – The second step and one of the most important is tracking your spending. You can use an app like Mint or Personal Capital for this. If you don’t have an overview of where your money is going and what expenses you can trim then you won’t be able to determine how you can throw more of your money at your debt.
3. Pay off your smallest debt first – The third step you need to take is analyze all your debts and pay off the smallest one first. Only pay the minimum balance for the rest. This is known as the snowball method. Once you clear the smallest one, you can put that chunk of money towards the next largest bill. Studies show this method is the most effective because you are able to see your progress immediately.
4. Increase your income – Unfortunately your current income might not be large enough in order to pay off your debts in the time frame you’d like even though you’ve cut expenses. In order to clear your debt quicker you will need increase your income. There are plenty of side hustles out there you can try for extra income like selling some of your old things, mowing a lawn, or monetizing a skill you may have like editing for example.
The sooner you can change the way you think about money and start putting a value on every dollar you have the sooner you can reach financial independence. It will not be easy, but it will be worth it. If there are any cool steps I missed share them in the comments below.
