Even if your income is less than you’re used to, or your money just doesn’t stretch the way it did in the past, you might still be able to pay off your debt quickly. To help you create a plan, check out these seven tips.
Table of Contents
- Know how much debt you currently owe
- Set a realistic budget
- Pay down the debt on your credit cards
- Automate your bill payments and savings
- Find additional sources of income
- Explore additional ways to pay off debt faster
- Seek a trusted partner
1. Know how much debt you currently owe
Start by getting a full picture of what you owe. Review your monthly statements for credit cards, car loans, medical bills, and other debts. Make a list for each that includes the following information:
- The amount you owe
- The amount of interest you’re paying
- Your annual percentage rate (APR)
- Your minimum monthly payments
It might help to check your credit report to review the open accounts it has listed. You might find older accounts that you did not realize were still open. If they still have balances, you will want to take note of that.
Once you know the scope of your debt, you can set some attainable goals. “After you set a resolution to better manage your debt, the next important step is to sit down and make a plan,” Nickele said.
2. Set a realistic budget
One of the first steps to paying off debt is committing to a monthly budget.
First, you need to create a detailed budget to track everything you spend. This lets you see exactly how much you need to pay basic expenses. Living within your means is essential, and it’s much easier to do when you know exactly where your money is going.
Once you have a clear picture of your monthly income and expenses, you may find areas in which to reduce spending. You might be able to cut back on optional expenses, such as streaming subscriptions, dining out, or recreational activities.
When creating your budget, guidelines such as the 50/30/20 rule might help. The idea behind this—or other strategies you might choose—is to understand how much money comes in each month and how it is spent. This way, you can set priorities.
By setting a clear budget, you have a chance to see where you have extra money to pay more toward your debt.
3. Pay down the debt on your credit cards
Credit cards are often a useful financial tool, especially when they offer cashback rewards. Just make sure you use them wisely. That means paying off the balance in full every month before the due date if you are able in order to avoid interest charges and penalties.
If that’s out of reach right now, be sure to pay at least the minimum amount on all your balances every month. And anytime you can pay more than the minimum, do it. You’ll reduce your overall credit card debt, as well as the total amount you pay in interest.
Similar to setting a budget, you can look for strategies to pay down your credit card or other debt. The debt avalanche method is the most cost-effective way to do that because you pay down your most expensive debt first. With this strategy, after paying monthly minimum payments, you would pay any extra money in your budget toward the debt with the highest interest rate.
Some people prefer the snowball method, where you pay the smallest balances first. With this strategy, you may see results quickly, which might provide added motivation.
Either way, the fastest way to pay off debt is to avoid any new revolving debt and to make timely payments before your due date.
4. Automate your bill payments and savings
Setting up automatic payments and transfers into savings might make it easier for you to stick to your budget and financial goals. It is also helpful for making sure you pay your bills on time. If your budget allows, you might set up extra payments for your credit card or other debts.
Not seeing that money in your checking account may help keep you from spending it on other things. There are even savings accounts to consider that might pay you more in interest, potentially providing you with some additional funds.
5. Find additional sources of income
It’s not always possible, but taking on additional work might generate more income to increase debt payments. Maybe you could start a side hustle, switch jobs, or find freelance or gig work.
If you need help figuring out where to start, make a list of everything you do well and enjoy. If you love animals, you might offer dog walking or pet sitting services. You might find ways to make extra money from hobbies, such as gardening or sewing. You might also be able to pick up extra work as a freelancer in data entry, marketing, or as a virtual assistant.
Consider the kind of customer who might benefit from your skills. Your personal and professional network may help you focus on potential customers, so don’t hesitate to include them in your brainstorming.
You might also think about selling items you don’t need anymore, either online or at a garage sale. If you have things you’re willing to part with, and you’re open to discount pricing, you could come into some cash without too much effort.
6. Explore additional ways to pay off debt faster
If you're facing the challenge of managing your debt and feeling overwhelmed, there's always a way forward. Making minimum payments may not provide the quick relief you're seeking, but taking proactive steps might lead to a brighter financial future. You may want to consider weighing these different ways to pay off debt faster and gain some peace of mind:
Personal loan
A personal loan for debt consolidation has a fixed interest rate and a defined repayment term, so you’ll know exactly when you’ll be debt-free. A personal loan might help you pay off debt faster and save money on interest.
Balance transfer card
You might also consider transferring the balance from one credit card with a higher interest rate to a card with a lower interest rate. This could help you save money on interest.
7. Seek a trusted partner
It might be difficult or new for you to talk openly about issues related to money. It may help to ask a close friend or family member to be your accountability partner in your debt payoff plan. Having someone to check in with regularly may provide moral support and consistency. A friendly conversation with your accountability partner could be just the encouragement you need to move on to your next financial goal.
Finally, don’t forget to celebrate as you reach your goals.
Paying off debt isn’t easy. But if you stick with it, you may find you can make a lot of progress in a short amount of time. We’re here to help if you want to consider a loan for debt consolidation. As one Discover Personal Loans customer said in February 2024: “This experience was truly a major stress relief and helped me get control of my finances so quickly and become debt free .”
Check out our debt consolidation calculator to see what you could save when you consolidate higher-interest debt with a loan from Discover.
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