Debt is a problem that many people face. It causes problems for people and families and is one of the most significant problems facing our government, from the national to the city level. Personal debt is one of the causes of many problems facing our society.
Debt can cause worry, stress, and anxiety, which can lead to serious medical problems and relationship issues. In fact, fiscal problems are a leading reason for arguments in marriages. Almost half of all marriages end in divorce, and 30% of those divorces are caused by the stress that fiscal problems bring to the marriage.
Finding a way to pay off debts will significantly enhance your health and relationships, not to mention allow you to achieve other financial goals on your journey to Financial Grounding.
Budget
To start paying off your debts, you need to know what you owe and how much the minimum payment is. You will also need to know where your money is going each month. The process of tracking your money is called budgeting. In a budget, you lay out all of your money, including where it is coming from and where it is going. This is also known as cash flow.
Hopefully, you have enough income to pay for all your necessities and minimum debt payments. Once this is accomplished, we seek extra money to start attacking the debts.
To be successful with the debt payoff schedule, you need to be able to pay more than the minimum payment each month. If you only pay the minimum, you will be trapped by the debt.
Now that we have our budget let’s look around to see when we can find extra money. Your budget may not have any wiggle room, so there may not be any extra money each month. If this is the case, you will need to create an infusion of cash to give you the necessary push to get the debt payoff schedule going.
Garage Sale
A garage sale is a great way to get the money needed to kick off the debt payoff schedule. If you don’t have the $67 per month extra in your budget, you will need to be able to pay off one of your debts quickly to create the needed wiggle room. The sample debts above show that the medical bill has a balance of $650. With a garage sale that is significant enough, you can raise that much money. Once that debt is paid off, you then have the extra payment money you need to get your debt payoff schedule underway.
In addition to giving you the immediate infusion of extra money you need, having garage sales regularly can provide additional funds to throw at the debts as you go along. We have a family member who gathers unwanted items from friends and family whenever she can. Once she has enough, she has a garage sale to get an extra income stream. By letting her friends and family know she’s doing this, they, in turn, set things aside for her.
Bonuses, Raises, or Side Hustle
Some of us have jobs that pay bonuses, usually upon completing a goal or at the end of the year, depending on company profits. This extra money can be used to throw at the debts to get them paid off sooner rather than later.
Raises can also be used for this. Even if you only get an increase in the cost of living yearly, apply that extra take-home money towards your debt payment to pay off the debts even faster. You’ll see shortly that every little bit helps to move the needle.
If you don’t receive bonuses and raises are few and far between, consider starting up a side hustle to get additional money. Like my family member in the section on garage sales, you can do a periodic garage sale to bring in extra money. Look at your skills and what you need to do to monetize them. Even mowing lawns on weekends can add another 50 dollars in income to pay the debts off.
Look online for side hustle opportunities based on your own skills to see how to market yourself and make additional money.
Avalanche Method
The avalanche method is designed to pay off debts quickly while paying the least interest and fees. List your debts from the highest interest rate to the lowest interest rate, regardless of balance.
Once a debt is paid off, add its monthly payment to the next debt on the list.
Keep paying each month. As you pay off the following debts on the list, add the amount of money you were paying on them to the next debt on the list. As you pay off the debts, your monthly payment grows and grows.
Snowball Method
The snowball method is designed to quickly pay off debts while paying the least interest and fees. List your debts from lowest to highest, regardless of interest rate.
As you pay off the following debts on the list, add the amount of money you were paying on them to the next debt on the list. As you pay off the debts, your monthly payment grows and grows.
Blizzard Method
The blizzard method combines the snowball and avalanche methods. To get an emotional win, start with the snowball method and pay off the lowest debt balance first. Once that’s done, you switch to the avalanche method, paying off the highest-interest debts from the highest to the lowest rate.
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