Paying off debt is not the easiest thing to do and that too when the amount is quite large. But it is certainly worth persevering. Debt can affect your financial and mental well-being in addition to your savings goals as well as future plans. But the good news is that there are some strategies you can follow in order to pay off debt quickly and get a stable financial footing in the new year. If you want to pay off the debt in 2023, here are a few tips to help you achieve your goals.
1. Set a budget
If you want to repay the debt, you must start by tracking the income and expenses by creating a monthly budget. It is a great way to get organized and have control over your finances. Preparing a budget does not have to be time-consuming, it could be something as simple as a spreadsheet. Alternatively, you could use a budgeting app to track your expense and debts in detail.
2. Handle the most expensive debt first
This is a strategy known as debt avalanche where you handle the most expensive debt first. It involves repaying the debts that have the highest interest rates. In this strategy, you will continue to pay the minimum amount for the other debts but focus mainly on the most expensive debt. Use any extra cash available to make this repayment. It can help save money in the long run by getting rid of the high-interest credit card debt quickly.
3. Pay off the smallest debt
Another strategy, known as debt snowball requires you to handle the debt smallest in size first. When you pay the smallest debt first, you will have the motivation to continue moving forward on the journey and you will stay disciplined. Do not try to take on a mortgage debt or a large student loan but focus on a small debt first. Choosing which debt to handle first will depend on your financial stability and the outstanding debt amount.
4. Always pay over the minimum balance
If you want to really pay off your debts in 2023, you will have to make an effort to pay a little over the minimum balance on the credit card statements every month. That said, you can also put aside some money for the principal on a home mortgage so that the extra payment will not be used on any other debts.
5. Consider a balance transfer
Through balance transfer, you can move the debt from one account to another while making the most of the low-interest rates. However, this process might not be possible for everyone depending on their credit score. But the strategy is ideal if you know you will be able to pay off the balance in a short time frame. You must make sure that you are benefitting from the low-interest rate.
6. Look for specific resolutions based on debt type
Understand the type of debt you have and then look for a solution that works for you. If balance transfer does not work for you, look for an alternative. For example, if you have to settle the Federal Tax debt, you can consider an offer in compromise. Knowing the type of debt will help you find the right solution to handle it.
7. Get rid of unwanted items from home
If you need some extra cash to pay off debt, you can consider selling all the unwanted items from your home. There are several shops where anything can be purchased or sold. Simply click a few pictures and upload them on the sites with a small description of the product you are selling. Put all the money from it towards paying the debts.
8. Consolidate debt
Debt consolidation is a process that allows borrowers to combine all their debts into one and repay it in a single loan with one monthly payment. You can also enjoy lower interest rates through consolidation and it could be a great way to negotiate a better repayment plan for your debts.
9. Work with a credit counseling agency
The process of debt repayment can be stressful and you can work with a network that is not looking for profit but is only there to help you. A lot of people go to credit counseling agencies that are ideal to guide you with debt repayment. They will help with financial counseling and offer a strategy to ensure timely payment of the dues.
Use these tips to go debt free in 2023 and if you remain committed, it is possible to repay all the debt with time. But once you reach your goal, avoid returning to the bad habits in order to stay debt-free. Understand how you came into debt and try to avoid going on that path again. Focus on your expenses, stay disciplined, and have control of your credit cards.
