Are you looking for a way to pay off your debts faster in 2023? Struggling with high interest loans, large balances, and late payments? You’re not alone — consumer debt has been a massive trend over the past year.
According to the research, debt has affected seven out of 10 Filipinos and is also a source of anxiety. If you’re among them and want tips on getting out of debt sooner rather than later, look no further. We have rounded up six powerful tips below if you’re serious about becoming debt-free in 2023.
Contents
- List down all debts from highest to lowest interest rate
- Use the debt snowball method
- Stop using your credit cards in the meantime
- Lower your expenses
- Use debt consolidation as the last option
- Be patient and don’t give up
1. List down all debts from highest to lowest interest rate
This first step is easier said than done. We don’t get the hang of listing down or taking notes. If you want to be debt-free this year, list them from highest to lowest interest rate. You will save more money in the long run. Why? You can see which debts cost you more in interest rates.
Start at the top with the debt that carries the highest interest rate. Work your way down until you get to the debt with the lowest rate. Include any other information that may help track progress, such as minimum payments due and dates for when those payments are due.
2. Use the debt snowball method
This method first pays off debts with the lowest balance while making minimum payments on all other debts. Start with the smallest debt to achieve quick wins and build momentum as you tackle your larger debts. Pay off your smallest debt first.
You repeat this process until all of your debts are settled. As each debt gets paid off, you’ll feel a sense of accomplishment and be motivated to keep going until your balances are zero. It’s less likely to be overwhelmed or sidetracked.
3. Stop using your credit cards in the meantime
Credit card debt is one of the most expensive forms of borrowing if you can’t control your spending. Interest rates and additional charges can reach double digits and remain for years unless you pay off the balance quickly.
It becomes harder to progress when you have new monthly charges. You incur additional fees or penalties if you can’t pay the balance in full each month. Focus on paying off past bills and restoring your financial health. The safest option is your debit card.
4. Lower your expenses
A crucial part of personal financial success is living well within your means. Reducing expenses allows you to put more money towards paying off your debt and can pay it off faster. So how do you do this?
- Create a budget. Track your spending to know how you spend your money. Determine what areas are unnecessary and which ones you should reduce.
- Cut back on recurring bills such as cable/internet packages or data plans. Check if your Spotify or Netflix account is worth paying for now.
- Take advantage of loyalty programs such as rewards cards at supermarkets or gas stations. Often these cards provide discounts on groceries, gasoline, and other purchases while also providing points that can be used towards future purchases or redeemed for cashback deals.
Ensure that more of your hard-earned money goes towards paying down debt instead of being frittered away on unnecessary things that don’t bring long-term value into your life.
5. Use debt consolidation as the last option
Debt consolidation is a powerful tool for paying debt faster, but use it cautiously.
It might seem like a quick fix for handling multiple debts and bills. But taking another loan can often create even more financial problems if not appropriately managed.
The goal is to consolidate multiple debts into a manageable payment scheme with a lower interest rate. How can you do this?
- Avail of a loan from a bank or lending institution
- Transfer credit card balances to a single card with a low interest introductory rate or special balance transfer offer
Once everything has been paid off, avoid falling back into old habits. Start creating healthy spending habits to build financial security.
6. Be patient and don’t give up
When it comes to paying off loans, patience and persistence are essential. After all, you don’t want to rush into decisions that could lead to more debt. Take the time to compare repayment options. You’ll be able to find a plan that suits your budget and helps you stay on top of your payments over time.
Don’t let setbacks derail progress. Take them as a learning opportunity and use them as motivation to stick with your plan. Say you’re struggling with making ends meet after paying off debt. Consider supplementing your income through side hustles or budgeting methods like the 50/30/20 rule.
- 50% of income should go towards living expenses
- 30% should go towards lifestyle expenses
- 20% should go toward savings
Having an additional source of cash flow can help reduce stress and make it easier for you to stay on track with paying down those debts faster. Remember, it took a while for your debts to pile up, perhaps, months or even years. So, don’t expect you can deal with this overnight.
If you’re determined to be debt-free this year by changing your spending habits, nothing is impossible. You can reach your financial goal.
So, which of these six tips do you think is easy to apply? Let us know in the comments below.