How to Pay Off Debt: 5 Practical Tips

July 14, 2021

If you’re in debt, you’re not alone. A 2021 CNBC report found that the average American carries more than $90,000 of debt. Still, just because being in debt is “normal” doesn’t mean that it is desirable. The good news is that there are some tips on how to pay off debt faster so you can work towards financial freedom. 

Start With a Budget 

It all begins with knowing where your finances stand. To do that, you need to create a budget that shows exactly how much money you’re bringing in each month versus how much is going out. The amount of money you’re left with can then be strategically allocated towards paying off your debt sooner. 

Choose a Repayment Strategy 

There are two main types of debt repayment strategies to consider: the snowball method and the avalanche method. With the debt snowball method, the idea is that you begin paying off your debts from smallest to largest. Each time an account is paid off in full, this frees up more money that you can allocate towards paying off larger accounts until all your debt is gone. 

On the other hand, the avalanche approach involves paying down your debt in order of interest rate, starting with the highest interest rate. By paying off high-interest debt first, you can save yourself money and free up cash to pay down other debts. 

Explore Consolidation Options 

If you have several different accounts with various interest rates and payment due dates, this can be a lot to keep up with. You might be able to make your life easier (and even reduce your amount of interest paid) by taking out a debt consolidation loan. The idea behind this type of loan is that it is a large lump sum used to pay off all your debts at once. From there, you have a single interest rate and only one payment due date to remember each month! 

Debt consolidation may not be the best option for every financial situation, but it may be worth looking into as you explore your debt repayment possibilities. 

Consider a Side Job 

Are you looking to bring in more cash that you can use to pay down your debt even faster? A side hustle can be a great solution. You can earn a decent side income by doing things like driving for a ride-share service or even delivering groceries in your spare time. 

Cut Back on Monthly Expenses 

You can also free up money to pay down debt by finding creative ways to reduce your monthly expenses. Canceling subscriptions you rarely use or even calling your cable/Internet provider to ask for a lower rate can go a long way. 

Need More Tips on How to Pay Off Debt? 

These practical tips can help you pay down your debt sooner while saving you some money in the process. Are you looking for more help with paying off your debt? Greenberg Financial Group is here to help! Contact us today to learn more about what our financial advisor in Arizona can do for you.