FINANCE

5 Ways To Get Out Of Debt Fast

WRITER: RAHIT RAUT

Few things are more demoralizing than unmanageable debt. All it takes is a short period of unemployment, unexpected medical bills, or other expensive life events, during which you rely on credit cards to pay bills. Before you know it, the interest on those credit cards inflates your bills to such an extent that you can’t get out from under the weight of growing debts. This is a common problem, but that doesn’t make it any less scary.

Luckily, there are specific strategies you can use to dig yourself out of debt, possibly much faster than you hoped. Here are five ways to get out of debt fast:

Make an Honest Reckoning

It may be impossible to pay your debts until you make an honest assessment of how much you owe. Gathering all those statements, bills, and past-due notices is intimidating, but it’s a difficult necessary first step that will ultimately make you feel better when you face your debts head-on. Make a list of all your debts, including details—monthly due dates, monthly payments, total amount owed, interest rates, and where to send payments and correspondence. This can be a spreadsheet or a handwritten list in a notebook.

Begin Paying Cash for Everything

A common psychological effect of debt is to think since you’re already in over your head, adding a little more debt each month won’t hurt you. This thinking keeps you in debt longer than necessary. If you are serious about getting out of debt, stop adding to it immediately.

Paying in cash at the store, instead of whipping out your card, makes you more mindful of unnecessary spending. If you need to, hide credit cards in a file cabinet or safe and only use them for true emergencies.

Consider Implementing the Snowball Method

There are typically two approaches to paying off debt: one, tackle the debt with the highest interest first, which saves you money in the long run. If you’re having a hard time getting motivated to start paying off your debts, however, consider the second approach—the snowball method. Look at your list of debts and start with the smallest one. Make minimum payments on other debts, and then throw any extra money you find toward eliminating that smallest debt. Once it’s paid off, move on to the next smallest debt, and so on. This approach makes debt repayment feel more achievable, and as you cross debts off your list, there is a sense of true accomplishment

Make Extra Income Each Month

If you are only making enough money to barely scrape by, it can be impossible to get debt under control. This makes it critical to find ways to turbocharge your income. Aim to make at least a little more each month than you did the last. Perhaps you are overdue for a raise but haven’t asked for one.

Maybe you have a hobby or skill you could turn into a side business. For example, sell your services as a freelance web design or sell homemade crafts online. Add a temporary weekend or evening job to help. Remember, the more money you make now, the quicker you will reduce your debt to relax later.

Send Settlement Letters

If you are behind on debt payments, creditors may settle your debt for less than you owe. For example, if you owe $2,000 on an old medical bill, and the hospital is no longer sure they will ever get that money, they may accept $1,200

(or whatever you can pay) in exchange for declaring the debt paid in full and updating your credit report to that effect. The key is to send a settlement letter (there are templates online) and only agree to a settlement plan in writing. Some creditors may say no or not respond, but you won’t know until you try.

Find Help if You Need It

If you try all of these steps and find yourself still overwhelmed by debt, you may need help from a professional debt management company. While some of these companies are legitimate, there are many that have shady business practices. Be sure to research the company and read reviews before signing up for anything. Debt management companies typically work to settle your debts with creditors, allowing you to make one monthly payment to the debt management company.

Being in debt is depressing, but if you follow these five tips, it can also be temporary. Soon you will experience financial breathing room and much less stress.