Estimated reading time: 3 mins
You start by spending more than you can actually afford, and without even realizing it, you suddenly feel crushed by the weight of your own debts.
It is at this point that you come up with the question ‘How can I pay off my debts quickly?’.
Debt is a sneaky intruder that can grow rapidly and affect your mental health.
Meanwhile, as if nothing is happening, you continue to live a normal life. You feel like you can’t talk about your financial issues with others, especially your family. You feel ashamed of your situation.
The best way to pay off your debts is by having an action plan. Thinking that you’ll pay off your debts as soon as you receive some spare cash, or thinking you can rely on luck, will not get you anywhere.
Postponing, procrastinating, and avoiding debt is not going to help. With time, your bills are going to get bigger and bigger. Get out of this vicious cycle by changing your attitude.
Step 1 – How to Stay Away from Debt
If you don’t want to find yourself in a considerable amount of debt, you have one golden rule to follow: define and respect your budget.
Your budget is the sum of money that you can spend each month. Divide your expenses into three categories that satisfy your primary needs:
- Bills and fixed costs
Discard anything that’s not within the budget since it’s not sustainable: you can’t spend money you don’t have.
Step 2 – How to Eliminate Debt Fast
List all of your debts: start from the smallest to the most consistent. Try to repay the small ones first, and then, proceed to the larger ones.
Progressing in such a way has a positive psychological effect since it tricks you into believing that you have money and that you can repay all of your debts. As a consequence, you start thinking ‘I can do this’.
If you receive job bonuses, prizes, inheritances, gifts, tax deductions, or discounts, make sure you use the money to cover your debt.
Step 3 – How to Save Money Fast
Keep an eye on your daily expenses. Here are some tips:
- Bring meals to work rather than eating out
- Use public transport
- Avoid unplanned expenses
- Quit smoking
- Make a shopping list before hitting the grocery store (so you only buy what you need)
- Repair broken objects rather than replacing them
- Shop when there are discounts
Step 4 – Cancel your Credit Card
It’s tempting to go below your current credit card limit. But what a mistake!
In fact, if for one reason or another you are unable to repay your overdraft, your interest rate will increase.
Do not postpone this essential step: cancel or stop using your credit card immediately. Instead, always pay with cash (at least until your situation has improved).
Step 5 – Ask for a Lower Interest Rate
If you have always paid on time, your creditors could agree to lower your interest rate so that you continue to do business with the company they represent.
Alternatively, you can seek a financial advisor that can guide you through this process.
Step 6 – Find a way to Earn More Money
Consider getting a second job until you have eliminated your debts. You can also sell objects and assets that you don’t need. By doing this you will achieve two goals:
- you will gather money to repay your debts and,
- you will empty your garage or basement
…that’s not bad!
Step 7 – Don’t Accumulate any more Debts
If you want to reduce or cancel your debts you must avoid requesting loans and creating new debts in your life.
If you don’t follow this step, you’re like a dog biting its tail: the more debt you accumulate, the more vulnerable you will become. Also, you could reach a point where banks or financial institutions will no longer be willing to give you loans.
A Final Word
Paying off debts can be a difficult and tiring journey toward freedom. But ultimately, it can help you regain possession of yourself and your life.
Remember, living without debt signifies being free: free to live a quiet life, and free to give space to your real priorities and desires.