Being buried under a pile of debt is a helpless feeling. A year and a half ago, I decided to sort through my debt and do something about it. Although I still have a long way to go, I have a detailed plan and specific goals that will lead me to one day, become debt free. Over that time period I have been able to pay off around $13,000, while saving another $3,500 for an emergency fund to cover things that may come up.
Before we dive into the bulk of the information, you have one task to complete as a first step: total your debt. It is time to face your fears and find out how deep in debt you are. Before you can pay it off, you have to know how much you have to pay. This is also helpful in motivating yourself to keep with it. If you don’t know how much you started with, it is impossible to tell how much you have paid off and what is left to pay off.
Here are three ways you can start working towards paying off debt now:
Create New Revenue Streams
A good way to tackle debt is to bring in new revenue. This is easier said than done, but this is not as tough as you may think. There are many ways to raise funds to help pay extra on your most daunting bills. Make sure that the extra money you do earn goes directly to already existing bills, and not to help fund new endeavors.
4 Ideas for New Revenue Streams
-Freelance journalism: As you read through this article, I am making money to help pay down debt, so thank you! Anyone can create an account on Yahoo! Voices and write articles for money. Write about what you know about and what you love.
-Part time job: A part time job added to your current work load, if you are working full time, is a big commitment and is not recommended for a long period of time. Look for a job you can work a night or two a week, and one in which you have the potential to earn tips.
-Buying/Selling: Selling unwanted items online is only a short term revenue option, so what do you know enough about to buy and resell for more? Check garage sales and thrift stores to find items you know are worth more than what they are being sold for. My brother has made thousands over the past few years selling ugly Christmas sweaters that he finds at thrift stores to party goers who will attend an ugly Christmas sweater party during the Holiday season.
-Odd jobs: Do you know anyone who needs landscaping work done? If you are savvy at selling things online like I mentioned above, see if you know anyone that would be willing to let you sell stuff for them for a fee.
Budgeting is probably the last thing I would want to do on a Friday night, but I now realize it’s importance. Having a budget gives you an outline of what your expenses are and how much of your income is available to pay off debt. If you do not budget, there is a great chance that you spend much more than you think on simple things like food, entertainment, and non necessities. Simply by budgeting, I was able to cut down my family’s monthly food costs from over $500, to under $350.
If you need help learning how to start a monthly budget, see the Dummies.com How to Create a Monthly Budget page here.
There are many free tools you can use to help budget for monthly expenses, see below for a free budget worksheet.
BudgetWorksheets.Org Free Budget Worksheets
Cut Down Current Expenses
There are countless ways to decrease your current expenses even beyond budgeting and limiting what you spend on a monthly basis. Here are five ways to cut down your current expenses.
-Cancel/Renegotiate cable TV and internet: Although we had cancelled our cable television package over a year ago, we were still paying over $60 a month for what was supposed to be high speed cable. When we realized it was not running anywhere need the speed that was promised, my wife called the cable company and was able to reduce the cost to $20 a month for 6 months, and then $40 after that. This one phone call saved us $360 over the next year. No matter what your cable or internet situation is, see what else is available to your area and try to negotiate a lower rate, or consider cancelling cable altogether.
-Negotiate credit card interest rates: Negotiating a lower credit card rate is much harder than it used to be as creditors have tightened up restrictions. There are still creditors that will lower rates to keep customers. Although you should eventually try to cancel all of your cards and attempt to live completely without debt, try calling to lower your rate. If you are in a financial emergency situation, there are programs available that the credit card companies offer to lower your payments and keep interest low for a limited period of time. If your creditors refuse to lower your rates, consider closing the card and paying off as quickly as possible.
-Insurance rates: Insurance is one play where you can save a lot of money by shopping around. From life insurance to car insurance, shop around for better rates and also look at companies that give extra discounts for bundling packages together.
-Coupons: Be disciplined, but start looking at coupons offered both online and in local newspapers. You need to be disciplined because it is easy to find good deals that you don’t need. Stick to the basics, but make sure to start searching for and using coupons.
-Eliminating subscriptions: I have a habit of signing up for subscriptions and then never cancelling them. Look at your monthly and yearly subscriptions and decide what is really necessary, and what can be cut. I was able to eliminate three magazine subscriptions, an online radio service subscription, and chose a cheaper subscription for online movies.
-Get the family on board: Budgeting and paying off debt is not an easy process. It is vital to your success that you get you spouse and entire family on board.
-Attend a class: I have participated in and have helped lead financial classes aimed at paying off debt. I highly recommend Dave Ramsey. Financial Peace University is an excellent class and Dave Ramsey’s book Total Money Makeover changed how I think about debt and helped me to realize that I needed to address my debt now.
Congratulations on taking steps towards paying off your debt. Stick with it, and good luck!