You’re in debt and feeling like you’ll never get ahead and don’t even know where to start. You’ve read the inspiring headlines “I Paid Off $50,000 in Six Months” and know that you can’t relate or compare, at all. But you want to get out of debt and STAT. The key is to run your own race and do what you can. If you’re feeling like you don’t know what to do or like you can’t make huge progress right away, here are six small actions to take when you’re just starting to pay off debt.
1. Review your situation
What’s one of the hardest parts of paying off debt? Getting honest with yourself about how much you owe. If you’re like I used to be, maybe you are in denial about your debt.
The thing is you must look at the numbers to see how much debt you have. Log into your accounts and add them all up so you can see clearly. This was so hard for me, I ended up deleting my Mint account to stay in denial. Don’t be like me! Denial catches up with you.
This small action will have a big impact. You can sync up all of your debt accounts into a financial program like Mint or Personal Capital. Also, signing up for credit monitoring from Credit Karma can help you see your accounts and ensure no one else opens an account in your name.
2. Start by paying $10 more
You might not be able to double your payments or put hundreds of extra dollars towards your debt right now. But you can likely put $10 more toward your monthly payment. Commit to starting small and pay $10 more for a month. The second month start paying $20 more and the third month $30 more. See how far you can go but keep making tiny steps toward debt freedom. Each dollar will help attack interest and get you closer to debt freedom.
3. Make biweekly payments
If you have student loans, here’s a simple strategy that can help. Take your monthly payment. Divide it by two. Pay that amount every two weeks, instead of monthly. Student loan interest is wild and accrues daily. In order to tame the beast, simply dividing your payments and making more frequent payments can help.
4. Pick up the phone
If you’re having serious trouble paying down your debt, pick up the phone. I know this small action is so scary but it can help. For instance, if it is student loans you are struggling with, call your loan servicer and see if there is a different repayment plan for your federal student loans. If your income is low, it’s possible to qualify for a zero dollar monthly payment.
Call your credit card company and see if they can waive that late fee. See if it’s possible to lower your interest rate at all.
5. Sign up for auto-pay
If you know you won’t overdraft on your checking account, you should sign up for auto-payments for your debt. That way you’ll never miss a payment or incur a late fee. Also, if you have student loans you might be eligible for a 0.25 percent interest rate reduction. Any reduction in interest rate can help you in the long run with the total cost of the loan.
6. Cancel what you can
In order to pay down debt, you’ll need extra cash to make progress. You can get a side hustle but start you cancel what you can. Consider canceling Netflix, the meal boxes, Spotify, etc. Remember, you don’t have to be without these things forever, just for a while to focus on debt payoff. Look at your expenses from the past three months. See what you can cancel now and what things you can cut back on. Then take that freed up money and commit to putting it toward debt.
Paying off debt is hard. There’s no doubt about that. When you’re first starting out it can feel daunting and impossible. But little by little, you make progress and move the needle forward. Using these six small actions, you can work toward paying down debt and make progress even if everything else seems unmanageable.
Melanie Lockert is a personal finance expert, the blogger behind DearDebt.com and author of the book “Dear Debt: A story about breaking up with debt.” Melanie paid off $81,000 of debt and is now on a mission to help others do the same.
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