Many Americans feel suffocated by debt with little hope of digging their way out in this economic climate. If you’re burdened with debt and looking for relief, you’re not alone. Debt can be debilitating and keep you from reaching your financial goals. Your thirst for financial freedom can help you get out and stay out of debt as you build wealth for yourself and your family.
But getting out of debt quickly requires a strict budget and a great deal of self-discipline. There are ways to jump-start your debt reduction and make a big impact on your finances, but you’ll need to be all in and be willing to say “no” to yourself. Here are five game-changing strategies to help you get started with eliminating debt and building a positive net worth.
Downsize and Minimize
You can substantially reduce your debt by downsizing and minimizing your discretionary spending. This requires you to make conscious decisions to cut back on non-essential expenses and redirect those funds toward debt repayment. In some cases, it might even make sense to sell your home, downsize into a smaller house or apartment, and use the equity to pay down your debt.
You can start with a quick search like Leave the Key Homebuyers Long Island to find a business in your area that can help with this. Of course, dining out less frequently, canceling unnecessary subscriptions, and clipping coupons are simpler ways to cut costs but you’ll need drastic measures to make the biggest impact.
You should also consider a minimalist mindset when it comes to material possessions. Go through your house and remove things you don’t need and could sell for some quick cash. This can help you declutter, especially if you’re downsizing your home, while also speeding up your debt reduction.
Work the Snowball with Intentionality
If you’re familiar with Dave Ramsey and his debt snowball method, you already have an idea of how small wins can speed up progress. If not, you might find the process of debt reduction a little more exciting by implementing this method. Working the debt snowball involves listing all of your debts from smallest to largest, regardless of the interest rates.
Once you have them listed, you will put all your extra income toward the smallest debt first while paying the minimum payments on all other debts. Once the smallest debt is paid off, you’ll take the amount you were putting on that debt and apply it to the next smallest debt until that one is gone. This creates that lovely snowball effect that gives you the quick wins needed to stay consistent with your goal.
But it’s important to be intentional because you can get tempted to increase your discretionary spending as you start seeing more margin in your budget. This method is more psychological than mathematical, as some people prefer to attack debts with the highest interest rate first. Eliminating the smallest debts first can give you that emotional boost to accelerate your payoff.
Boost Your Income
Cutting your expenses is a key component to paying off debt. But it’s not the only way to tackle it. When most people think about getting out of debt, they think about getting on a budget and reducing their spending. Another way to make progress is to increase your income. There are a lot more ways to supplement your income than there were 20 years ago.
The gig economy and multiple freelancing opportunities can provide the extra cash you need to expedite your payoff period. The more intense you get, the bigger the dent you can put in your debt. Some side gigs may not seem worth your time, but even an extra $100 per month can help you get started with knocking out those smaller debts so you can get the ball moving.
Aside from selling stuff in your home, online platforms make it a lot easier to sell valuable services too. Think about the skills and knowledge you have to offer that can solve problems for others while putting money in your pocket.
Negotiate With Debtors
When you have massive amounts of debt and a negative net worth, it can make you feel powerless. You get overwhelmed with anxiety knowing that the money you work hard to earn belongs to someone else before it even hits your bank account. But learning to negotiate well can give you confidence as you start tackling the debt. It’s similar to the feeling you get while trying on clothes after starting a new workout routine.
You may not be the size you want to be yet, but you know you’ll get there because you’re doing something different. Sometimes life just doesn’t allow much room in your day to substantially increase your income or decrease your spending any more than you already have.
But you can always negotiate with your debtors to get a better solution. During your negotiating, transparency and cooperation are your friends. For example, if you have a lot of credit card debt you may be able to call and negotiate a payment plan that allows you to pay off your balance with no interest as long as you make payments on time.
Ask for Help
Depending on your situation, you may need to escalate your debt reduction plan to professionals who can help. If you have a lot of student loans, reach out to your loan servicer for assistance with setting up payment plans or consolidating your loans. Sometimes debt consolidation can be less effective and you may need help determining if this is a good option for you.
Whether it’s a debt counselor, CPA, or financial advisor, having someone look over your shoulder or offer advice can be invaluable when you want to get out of debt quickly. It may take a little commitment and a lot of humility, but getting the right help can be a game-changer for your finances.
Final Thoughts
If you want to overcome debt and build wealth, you’re going to need discipline, determination, and strategic planning. If you’re willing to downsize, work the debt snowball, pick up a side gig, negotiate, and ask for help, you can fast-track your journey toward financial freedom. Remember, the path to wealth is paved with intentionality and proactive steps toward a brighter financial future.