Tackle debt with these 6 tips

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When it comes to finances, there are several types of people. Some folks love all things finance-related and could talk about numbers and money, stocks, investments, etc., all day long. Others would rather go through life never thinking about or discussing money issues. They’d rather leave the handling of finances to someone else. Then, there are those who fall somewhere between the two extremes. These people see finance and money issues as necessary, although not their favorite topics of discussion. No matter which category you might use to describe your feelings about finance, when trouble arises, you want to know how to resolve it. Any person in any of the categories mentioned here can encounter a financial crisis in life. When that happens, it’s helpful to know how to tackle debt.

Keep these 6 tips in mind to tackle debt

While it’s possible, it’s unlikely to find someone who has never been in debt. Many people are indeed fortunate enough to live debt-free. Most, however, have, at some point in life, encountered financial challenges. The following list includes six relatively-easy-to-implement ways to tackle debt:

  1. Stop spending money unnecessarily — not always as easy as it sounds.
  2. Do not use credit as cash.
  3. Pay more than the minimum on your credit card balance, especially the one with the highest interest rate.
  4. Increase available cash flow by generating supplemental income, and commit to using the funds only to tackle debt.
  5. Look into debt consolidation options and/or negotiate better terms on credit card accounts.
  6. Try using the ‘snow avalanche’ or ‘snow ball’ systems of payment to start knocking out debts.

Every person’s financial situation is unique. Many people can relate to other people’s experiences, however. For instance, in many households in America the primary cause of debt is medical bills. Other issues that often spark serious financial crisis include unexpected loss of income, car repairs and taxes. Sadly, gambling and other addictions also cause many people serious financial problems. One or more of the tips included in this post might help you tackle debt. Let’s look at them, one at a time:

Tackle debt by curbing your spending

It seems like a no-brainer but it really isn’t that simple. On one hand, it makes logical sense to stop spending money if you’re in debt. On the other hand, however, many people consider certain types of spending inconsequential. That’s where they run into trouble. You’re out with friends, you see a great deal on something you’ve been wanting to buy, and you get it. In your mind, you justify the purchase by thinking of how much you’ve saved off the regular price. The problem is that if you are in serious debt, you don’t really have surplus funds to spend, period — no matter how great a deal might be.

It takes self-discipline and commitment to tackle debt. If you feel like you can’t go “cold turkey” and take your unnecessary spending down to zero, set restrictions. Tell yourself that you will not spend more than “X” amount in a given month, and stick to the plan! Tackling debt this way typically requires a change in lifestyle. It’s change you’ll be glad you made when you start to see the balance on your credit cards go down!

Pay cash whenever possible to tackle debt

A lot of people say they don’t like to carry cash around with them. They use their credit card for all purchases. This is fine, as long as you pay off the entire balance within the grace period during a payment cycle. Some people say they like to use credit as cash because they have cards that earn points, which they can convert to cash. In short, they are making money by using their credit cards. Sounds good, but here’s the kicker: Credit cards that offer point rewards systems often do so through “participating merchants.” What tends to happen is that you make purchases you might not otherwise have made, just to get points. It’s sort of like making purchases at a grocery store when you have coupon for a product you don’t normally buy! You think you saved money, but really, you spent money you wouldn’t normally spend.

To tackle debt, commit to using cash whenever possible. Keep your credit card for large expenditures or emergencies. Avoid swiping the card, thinking that you’ll pay off the balance. Too often, other financial issues arise and the balance winds up unpaid, with rising interest rates and penalty fees accruing.

Always pay more than the minimum, if you can

High interest rates are usually what make it so difficult to tackle debt. It’s a relief to be able to send minimum payments. It often backfires in the long run, though. Every time you pay only the minimum required on a credit card balance, you’re setting yourself up for higher interest rates. It takes much longer to resolve a debt this way because most of your money is going toward interest. On the flip side, if your minimum payment is $250 and you send $400, you’ll soon see your interest rate go down. You can save thousands of dollars this way and pay off debt much sooner.

Get a side-hustle going to generate funds

A recent post here on The Hot Mess Press offers some great, creative ideas for earning supplemental income. When the purpose finding ways to increase your cash flow is to tackle debt, start with a commitment. Promise yourself that you will use 100% of the money you earn to pay down debt! Do not use it for anything else! Think of how happy you’ll be, if you’re earning $1,000 with a little side-hustle and using all of that money toward a credit card balance!

Debt consolidation options are risky, so be careful

Another way to tackle debt is to take advantage of debt consolidation offers. If you plan to go this route, however, make sure you read ALL the fine print! There are many scammers out there who make big promises to help people get out of debt. In the end, unsuspecting victims wind up in worse financial shape than they were to start. I included debt consolidation as a tip to tackle debt because there are some programs that are worthwhile. Just be careful!

You can also call your credit card companies or lenders to try to negotiate better terms of agreement that make your payments more feasible. As for lenders, they want you to succeed in paying off your debt, especially if it’s a mortgage. When a house goes to foreclosure, it causes lenders a ton of paperwork and stress. Many lenders are willing to agree to alternative payment plans. This way, you continue to pay off debt with a plan that is more doable for you during a financial crisis.

Two more options that are similar, yet different

Particularly for credit card balances, you can start to tackle debt by applying methods known as the “snow avalanche” or “snow ball” effects. With the avalanche system, you pay your minimum payments every month and send any surplus funds you have to the balance with the highest interest rate. Remember, paying more than the minimum payment each month is the best way to lower your interest rate and tackle debt.

The snowball effect is similar, except you focus on paying off the lowest debt off first, then the next lowest, etc. Think of it like having a big to-do list and tackling each job in order from easiest to most difficult. When you send as much money as you can toward your lowest debt, it will be eliminated sooner than the others. As debts begin to disappear from your list, your money starts to go toward the higher debts, until, at last, you’ll be debt free!

Resolving debt takes time, diligence and commitment

Being in debt can take a toll on someone, mentally and emotionally.  In most cases, there are options available to tackle debt. Also, in most cases, financial crises are temporary. It’s much easier to fall into debt than get out of it. But, it IS possible, especially if you keep these six  tips in mind and any others that might help you accomplish your goals!

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