From Overwhelmed to Debt-Free: Effective Strategies for Paying Off What You Owe

Debt piles up like a load of laundry, quickly and it doesn’t seem like there’s any end. When you finally realize how much debt you may be in or just how much you’ve spent in such a short time, you may begin to feel an immediate sense of anxiety and be overwhelmed with a lack of control. You’re not entirely sure how you got there because it started off with just purchasing a few items that caught your eye, but then you form a habit and you essentially become a purchasing machine using that plastic as if it’s monopoly money. Although we may wish it was, it’s not, it’s real and we have to pay it back and sometimes more. So, how do you get out of a hole that you weren’t even aware you dug? Being disciplined and having a strategy. Here are some tips and practical methods you can use to become debt free:

Pen Down Every Red Cent Owed

When tackling debt, you want to be aware of everything. You want to have every detail related to your debt in one place, whether that’s on physical paper or in the Notes app on your phone. Okay, so what exactly should I put on this list and why?

1. Write down every balance owed, down to the penny and create a list of all your credit cards (used and not used). This will help you realize what cards you spent the most on and how close you are to maxing out cards, if you haven’t yet already.

2. Write down the annual percentage rate (APR) of each card. Today's average interest rate is just under 24%, so when you see a credit card that says "22.99% APR," it means that you will be charged that percentage yearly on any balance you may have over the next 12 months. Why does that matter? You’ll be charged more than $200 extra, simply for having a balance of $1,000 over the course of a year, resulting in you paying over $1,200.

3. Focus on the cards with the highest rates, because they’re costing you the most. You'll continue to make the minimum payments on all of your cards on time, but you'll contribute more towards the card that has the highest APR to pay off the debt much quicker. As you pay off each card, you move on to the next highest card; this strategy is known as the avalanche method. Now, of course this is all MUCH easier said than done, because debt can affect our lifestyle and it is a huge weight to carry, especially when life still goes on and bills still have to be paid.

Increase Your Income

Another way to tackle debt is to bring more money in. More money doesn't always mean more problems, sometimes it can be the answer. You can increase your income in many ways, overtime at work, picking up extra shifts or getting a second job. But, if getting a second job or working more at your main job isn’t the route you want to take, there are other ways to make more money. There are so many ways to increase your income, both conventional and unconventional. You can begin recycling for cash, pick up after work and weekend side jobs such as food delivery. A lot of people share the feeling of their salary not being enough to make ends meet, so here are some more ways to increase your income:

Get Paid to Do What You Love

Do you have artwork all over your home that your friends constantly compliment? Well, if you enjoy things such as painting, writing, graphic design or frankly anything that someone might be willing to pay for, you can start a side hustle. Platforms such as Fiverr, Etsy or Upwork can be used to your advantage to share the artwork you’ve worked on or the services you may offer, and you can quickly start to earn money on the side.

House-Hack

Have an extra unit in your home or an extra room? Rent it out! You can rent out the unit or room to a long term tenant or use platforms such as AirBnB to make some extra cash. The preference is up to you, if you’re looking for stability, the long term tenant might be the best option. But, if you happen to live in a high traffic area such as near a sports arena or a concert venue, hosting an AirBnB might be the better option.

Garage Sale

Do you have a bunch of things just piled up collecting dust, that you only remember when your pinky toe bumps into it? Electronics? Clothes? Furniture? Well, you can have a garage sale and no, you don’t actually need a garage! You can use Platforms such as eBay, Facebook Marketplace, Mercari, Poshmark or you can sell locally! Selling items that you no longer use, can not only help declutter your space but can also bring in some cash!

Debt Consolidation

Debt consolidation is another pretty good option, it’s like compiling all of your debt into one ball instead of trying to juggle six. Debt consolidation is a great solution if you have multiple balances on cards, all with high APRs. So, instead of worrying about making a different payment for each card, you only have to worry about one monthly payment. Debt consolidation is typically a loan that you’ll take out to pay off all of your high interest rate debt. Although the loan you obtain for debt consolidation won't be interest-free, it may have a lower APR than the rate applied to your credit cards, allowing you to save money on interest and apply it to reducing the principal. The ideal way to choose a debt consolidation loan is to create a plan with a financial advisor. If you're more of the DIY type, make sure to take into account the interest rate, fees, repayment terms, and impact on your credit score and evaluate if it’s really worthwhile for you. Identify whether the loan is secured or unsecured as well, if it is secured, you may be placing your assets at risk.

Even though getting into debt happens in the blink of an eye, getting out of it is a gradual process that takes time and requires strategy and dedication. Remember to do what’s best for you and to give yourself grace, debt does not mean the end of the world because if you can get in it, you can certainly get out of it. If you're having trouble with debt, it's wise to seek the guidance of a financial expert. This way, you can avoid falling into habits that only deepen the hole and keep you trapped in a never-ending cycle of debt.