Paying off your debt – 5 strategies to do it quicker and easier
Use these five helpful strategies to pay off debt faster, easier, and without any added financial stress. (iStock)
The coronavirus pandemic has dramatically impacted the average American’s finances, both positively and negatively. Though many men and women were able to reduce their credit card debt in 2020, many others still struggle under the weight of substantial debt from student loans, credit cards and mortgages. For example, the average elderly household is carrying anywhere between $31,000 and $86,000 of overall debt due to these three financial burdens.
Thankfully, having the right type of savings account, such as a high-yield saving account with a high interest rate, can be instrumental in paying off your debt as quickly as possible. If you’re interested in exploring quick and easy ways to pay off debt sooner, visit Credible to find a high-yield savings option that fits your financial goals.
3 WAYS TO PAY OFF DEBT IN RETIREMENT
There are many tactics you can use to tackle your debt, including these strategies that could potentially help you achieve this goal faster and easier:
- Have a plan
- Address credit cards
- Debt consolidation
- Stop frivolous spending
- Find another source of income
1. Have a plan
Having a well-thought-out plan of action to tackle your debt is key to achieving this goal responsibly. One way you can conveniently manage all of your debts is to create a debt spreadsheet, laying out each debt, minimum payment, interest rates and due dates.
Another strategy you could consider implementing is the 50/30/20 budget rule: allocate your after-tax income to 50% living expenses, 30% discretionary expenses and 20% to savings.
2. Address credit cards
If high credit card balances are your primary source of debt, you should try to limit or completely stop using your credit cards. Interest rates can substantially inflate your balance, especially if you open a new credit card account with a temporary 0% APY and do not pay down your balance before the new interest rate is assessed. With the average credit card APR around 16%, even one month’s interest fees may be sizeable. Once you limit your reliance on your credit card, you can put the would-be interest rate charges into your savings and improve your credit score at the same time.
Did you know that you could find out your credit score without making it drop? Visit Credible today to check your credit score without negatively impacting it.
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3. Debt consolidation
Debt consolidation involves combining your credit card or loan debts into a single balance. Utilizing a balance transfer credit card or debt consolidation loan has many advantages, including simplifying your monthly payments into a single one and potentially providing you with a lower interest rate. Debt consolidation is different than a debt settlement, which is an attempt to negotiate down your existing debt with creditors. This is a riskier option that won’t guarantee your debt will be reduced and you could actually end up paying more than your original balance if your debt cannot be settled.
Are you considering consolidating your debt? Then you should visit an online marketplace like Credible to explore a variety of personal loan options.
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4. Stop frivolous spending
Never underestimate the savings potential from simply cutting costs. From making coffee and eating meals at home to limiting impulse purchases and canceling underused subscriptions, any small sums you can save could be put towards paying down your debt.
If spending five dollars here and there can really rack up your expenses, imagine how much you can boost your savings with this money instead. Visit Credible to explore high-yield savings options that could be maximizing your interest earnings.
5. Find another source of income
The old metaphor "time is money" may help you pay down your debt. If you have the time available, a "side hustle," such as a part-time job or freelancing role, could help you increase your income. Simply earning $50 by working one extra day per week equates to an extra $2,600 in a single year.
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Final thoughts
Debt can feel overwhelming but it can be responsibly managed by taking action. Creating and following a debt recovery plan, which may include strategies like cutting out frivolous expenses or debt consolidation, can help you quickly pay down your balance. Opening a high-yield savings account is one way to maximize your interest-earning potential, which can then be used to pay off your debt faster. Keep in mind that the FDIC has reported that the national average savings account only earns 0.04% APY, whereas the average high-yield account earns substantially more.
Should you use a high-yield savings account as a debt recovery strategy? View the current APY and learn more about the benefits of high-yield savings account options via Credible.
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Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.