If you’re among the 36% of shoppers who racked up $1,181 in holiday debt, don’t dilly dally. Taking action quickly to pay down these balances will help you save money and avoid useless fees.
Tackling debt is overwhelming if you don’t know where to start. However, this step-by-step guide will show you how to pay down balances quickly so you can stress less and enjoy more flexibility in your budget. Just follow these 5 steps to get started.
1. Set a detailed plan.
Planning is key to succeeding in any goal, and paying off debt is no different. Go through each account to figure out how much you owe, noting the interest rate on each balance. Paying off the balance with the highest interest rate first will help you save more on fees. For help creating a realistic plan and tracking your efforts, tap in apps like Debt Payoff Planner. This will allow you to visualize your progress and stay motivated.
2. Hack monthly bills.
You could be wasting money on monthly bills in the form of unused services or forgotten subscriptions, and those extra dollars could go towards paying down holiday debt faster.
Begin by listing out all your recurring expenses and look for savings by negotiating rates, cancelling unused subscriptions, bundling services and lowering your data plan. In fact, one study found that Americans waste $1,500 a year on excessive wireless services. Alternatively, you can save by switching to an online only wireless carries like Mint Mobile which features more affordable plans such as Mint Kids, offering unlimited talk and text with 5GB of data for just $15 per month.
3. Transfer your balance.
With credit card interest rates hovering over 20%, monthly fees can pile up quickly, making it harder and more expensive to pay down holiday debt. However, transferring your balance to a credit card with zero percent interest on balance transfers can help you avoid these fees.
Zero balance transfer cards offer up to 21 months with no interest accruing, which means your entire monthly payment goes towards shrinking your balance instead of a portion going towards useless fees. This strategy will allow you to pay off debt faster and save more money in the process. Just make sure to compare balance transfer cards at sites like CardRates.com to find the best one for your financial needs.
4. Increase your cash flow.
When budgets are tight, finding extra money to make bigger debt payments may feel impossible and making more money can help. While getting a raise or better paying job may not be a realistic option, there are other ways to boost your monthly cash flow. Considering taking on a flexible side hustle like pet sitting or virtual tutoring, rent unused baby gear through BabyQuip or turn clutter in to cash by hosting a garage sale, selling old sporting goods at SidelineSwap or trade unused gift cards for cash at CardCash.com.
You can also make money on daily purchases by using reward tools like Fetch Shop, a web extension that rewards with you points for online purchases made at partners sites which can be redeemed for gift card to Target, Amazon and more to offset future purchase needs.
5. Don’t ignore saving.
Saving money is crucial when you’re trying to rid yourself of holiday debt. That’s because you need access to cash in case of an emergency and unexpected bills. Otherwise, you end up relying on a high interest credit card. Aim to save at least one month of living expenses in a separate account and put it in a high yield savings account so it works harder for you. For example, Bread Savings offers a competitive 4.5% annual percentage yield which is much higher than the national average of 0.46% APY offered by traditional savings accounts.
Paying down debt can feel intimidating and depriving, but the sooner you do so, the sooner you can enjoy more flexibility in your lifestyle.
