KNOXVILLE, Tenn. (WATE) – No one wants to start out a new year in debt, but in 2016, credit card debt and auto loans drove up household bills for millions of people.
Similar to a new year’s weight loss plan, paying off debt requires dedication, determination and persistence. Just think about what happens to those who crash diet, but then fail after a few weeks. Debt reduction works in the same manner; brief bouts of deprivation only make things worse.
Here are a few smart ways to pay off debt fast this new year:
If you desperately want a way out of debt, you have to cut down on your use of your credit cards. The more you swipe, the more the balance climbs. Start by setting up a spending plan and building an emergency fund to get you through those tough situations without having to resort to debt.
Pay as much money as you can afford to pay down your debt each month. Once you have an emergency fund intact, use any extra money you have at your disposal to put toward debt, even if it’s only a few dollars. The more you pay, the faster you’ll get out of debt. Did you work some overtime last week? Use that to lower your debt.
Make cuts to your spending. This may be tough to accomplish. You’ll have to take a good look at where your money is going and separate the necessities from the mere wants. You can’t cut every single expense in the book by 75 percent, however, you can go without the daily trips to the local coffee shop. Over time, savings can add up and can dig you out of the hole quicker than you probably expected.
Tackle those debts with the highest interest rates first. Although some prefer the debt snowball method, which suggests that you pay the debts with the lowest balances first to build momentum, it’s wiser to get those with the higher interest rates out of the way first.
If you’ve paid off one credit card, now start doubling up on payments. You need to keep the momentum going by allocating those funds that are now freed up to the next balance in line.
Don’t sacrifice the things you love the most. Paying off debt may require you to make a few lifestyle changes; however, if you have a difficult time adjusting to new circumstances, implement gradual changes so the process won’t become too overwhelming.