Chances are you’ve built up some debt over the years. You’re not alone. In 2021, many experts found that 70%-80% of Americans carry consumer debt. While there’s no magic wand that can get rid of these looming expenses, you can take a proactive approach and create a debt-elimination plan. Here are some tips to help you pay off debt as efficiently as possible.
Make a list of all your current debts. This should include the balance owed, the interest rate, the minimum payment amount, and when payments are due. Once you've got all of your debts listed, order them by both interest rate and balance owed. This will help you decide how to prioritize them.
After looking at these lists, come up with a game plan. As a general rule, the first debt on the chopping block should be the one costing you the most in interest (this often means the debt with the highest interest rate). This will save you more money over time. Then again, some people prefer to pay off the lowest owing balance first so that smaller debts can be eliminated quicker, thereby leaving more money to go to larger debts.
Any time you come into some extra money or are able to save elsewhere, put it toward your debt. For example: If you usually spend $100 on groceries but end up only spending $80 during a particular shopping trip, allocate this extra money to your debt. $10-$20 here and there can make a big difference over time.
Most importantly, don’t miss any payments. This can result in costly late fees that will further drag out the process of paying off your debts. Looking at the lists you've made above, take note of all your payment due dates. Then, write them down on a calendar, program them into your phone, or set up automatic payments.