How to Pay Down Your Debts

Are you mired in debt? Do you think you’ll be paying down your debts for the rest of your life? It doesn’t have to be that way. You can pay off your debts ; but you have to have the determination and the discipline to do so. There are no shortcuts you can take or gimmicks that will wipe your debts away.

Paying down debt is a two-step process. First, you have to figure out how to save more money. Then you have to apply it to your debts and wipe them out.

Saving Money

You have a number of things you can do to save money, but first you have to know where that money is going.

Track Your Spending

This is the hardest part. You need to get a notebook and a pen or set up a spreadsheet. For the next two weeks, you need to record every penny you make and spend. When you are done, go back over the list and see where you can cut. You will be surprised at how much money you wasted – even if you don’t have a four-dollar-a-day latte habit.

Make a Budget

There’s no getting around it; you need how much you have coming in and where it needs to go before you can see how much is left and figure out where to make cuts.

Trim the Fat

Get rid of the money wasters you found while tracking your spending. Then move on and make cuts in your budget. Drop the landline (or the cell) and reduce your phone service to the bare minimum. Get rid of that gym membership you never use. Find every spot you can cut, and do it.

Use Free Internet

Many places have free internet access. Take advantage of it and drop your home service.

Buy in Bulk

It’s often cheaper to buy things in bulk than it is to purchase smaller lots.

Buy Generic Items

Name brands are over-priced and generics are comparable in quality.

Cook from Scratch

Stop buying pricey convenience foods. Your wallet and your health will both thank you for cooking from scratch.

Don’t Eat Out

If you’re in debt, you’ve no business eating out – period.

Use Coupons

Coupons can be a way to save money, if you use them right. Most coupons are for name brands and/or unnecessary items. Only use coupons that will really save you money.

Use Cash Back Programs

Many online sites will give you cash back for buying things online. Take advantage of them. Also, you should take advantage of any cash back deals offered by your bank.

How to Pay Your Debts

The fastest and most efficient way to pay down your debts is to use the Snowball Effect. Look at your debts and rank them from smallest to largest. Don’t look at interest rates; many people make the mistake of paying the debt with the highest interest rate first, but that takes much longer. Start with the smallest debt. Put every extra penny you can squeeze out towards it. Meanwhile, you should only pay the minimums on all of your other debts. After you pay off that debt, take the money you were paying towards it and apply it to your next largest debt, and so on.