Debt consolidation is not an easy task but should be manageable based on several factors such as the balance, interest, and your capacity to pay. If you're currently having financial issues and need advice on getting out of the debt trap or just looking for tips on managing your finances more responsibly, we have gathered recommendations from various professionals to help you.
First is from Hays Bailey, Director of Sheqsy
Being mindful of your finances is not an extra here but is necessary. To be on a strict budget for everything will be part of the hard way of getting out of it, but it will all be worthwhile. Spending less on what you've reserved for something is technically a better choice. You can do this by finding cheaper alternatives, being thriftier, and settling for homemade stuff like foods.
Second is from Nick Edwards, Owner of Car Paint Experts.
The quickest way to put a dent in your debt is to save up the money you would have been paying out on interest and apply it towards your balance instead. A little extra effort can go a long way here. Anytime you get cash back from a purchase, transfer that amount to your debt repayment fund after putting some aside for savings, of course.
Be prudent about your credit cards. It's easy to fall into the trap of thinking you can pay it back at the end of the month, but you'll only be setting yourself up for failure.
Alina Clark, Co-Founder of CocoDoc, provided these tips:
Simply put, anyone who wants to get out of debt should stop getting into more debt by borrowing more money. Taking one debt to pay off another is not a workable thing, yet it's so common that it's almost become normal. It may sound radical, but getting out of debt means an end to all credit card debt and loans and putting a stop to all new loans.
Debt consolidation and transfers are not good starting points for getting out of debt. One should consider finding ways to stop any increase in debt before thinking about consolidating debt. Stopping all incoming debts, just like a bandage, is the first step to resolving any debt crisis.
Jake Hill, CEO of DebtHammer
It would be best to create a specific plan to get out of debt. This starts with creating a smart budget and tracking your spending. Then, map out your payments to know what the minimum payments are for each loan and when those are due.
A strategy that has proven to be successful is called the debt snowball method. This means that each month, you make the minimum payments for each of your loans except for one - and for that one, you pay the minimum PLUS any additional money you have leftover from your budget. This will allow you to pay off that specific loan much sooner; then, you focus those same efforts on one of your other loans once it is paid off. The cycle continues until all of your loans have been paid off one by one.
An expert in the field, Anna Caldwell, Finance Writer from Beyond Finance, provided these pieces of advice:
You can reduce your overall interest charges for credit card accounts that carry a balance month-to-month by making small, frequent payments. It helps because, in many cases, interest accrues based on your average daily balance during the billing period. The lower you can keep the balance day by day, the less interest you pay.
This only works if your loan doesn't have a fixed monthly payment term for loans. It won't be helpful if your loan is amortized on a specific date regardless of when you paid. So make sure you check with your loan provider and enroll in a bi-weekly repayment plan if necessary.
Debt payoff apps allow you to round up transactions to the nearest dollar. That change is saved and sent as an additional payment on your debt every month. The best part of this habit is that it is fully automated. You can set it and forget it. For example, paying $20 more than the minimum monthly payment could shave $600 and nearly a year off your credit card repayment. A little change can go a long way!
Amir Behrozi, Founder of My Home Dojo
Focusing on the three crucial steps in eliminating debt is a great way to start. The first step is creating a budget. A budget forces you to evaluate your expenses and set realistic goals about what you can afford to spend or save each month. The second step is making necessary sacrifices for spending money, like eating out, buying clothes, or upgrading technology (unless these expenditures are truly important). Finally, the third step would be to pay off your debts with an affordable repayment plan upfront instead of using credit cards, making it easy to postpone but difficult to get out of due time after time.
Kari Lorz, a Certified Financial Education Instructor from Money for the Mamas, has one simple yet effective recommendation.
The number one habit that people need to master to stay out of debt is to spend less than they earn. This sounds like a very simplistic and obvious concept, yet it's one of the people's hardest things. You make money decisions multiple times a day, every single day, so there are a lot of opportunities to drift away from this principle. Once you start down the path of buying anything and everything you want, it can be a long and hard road to bring your finances up out of the hole you've dug. So, don't even go down that road. Know how much income you take home and spend less than that.
James Lambridis, the Founder and CEO of DebtMD, imparted these directions to our readers:
There are only two ways to get out of debt; increasing your income or decreasing your expenses. Doing both simultaneously will accelerate the payoff of your debt even more. Everyone can use the extra income, especially when paying off debt. We live in a gig economy where there is always a way to obtain extra work. This can entail anything from driving for Uber or Lyft, walking someone else's dog using the Wag app, or even babysitting. These are just a few examples, but if you have free time on nights and/or weekends, these are practical ways to earn extra cash to be used to pay down debt.
Decreasing your expenses may seem a bit more difficult when you are accustomed to a certain lifestyle. However, there are several things you can do to save hundreds of dollars each month. Cord-cutting is the most obvious and prevalent; by doing away with cable and switching to a streaming service such as Netflix or Hulu, you can save money and probably even have a more enjoyable experience when you do decide to watch TV. Eating out is another big expense that people splurge on without thinking. With the average cost of eating out per person in the United States being about $13, translating this to a party of two, the cost of eating out once a week over a year is close to $1,400. Buying groceries and eating at home can cut this expense down significantly, and you will be able to eat healthier as a bonus.
In the end, getting out of debt comes down to increasing your cash flow, which can only be done by earning extra cash or eliminating unnecessary expenses.
Jennifer Harder, the Founder and CEO of Jennifer Harder Brokerage, recommends these practices:
I recommend paying more than the minimum required for accelerating debt repayment. Attempt to spend as much as possible toward bills each month.
When building your initial budget, establish a minimum monthly payment toward debts. This should account for approximately 20% of your total income. Of course, any opportunity to add more will expedite your progress toward your goals.
It is critical to pay more than the minimum necessary, whatever your circumstances. Make this an unbreakable habit. Even if you have a lousy month filled with unforeseen emergency bills, make a larger payment than the minimum if possible.