Whether you’ve borrowed a small amount on a credit card or have a substantial bank loan you need to pay back, getting to grips with your finances is no easy task.
While paying off debts can be a big challenge, the relief that comes with getting back on track is hard to beat.
Here are some top tips from chartered accountants for paying off debts as quickly as possible.
1) Assess Your Situation:
Never remain ignorant to your debts.
Many people know they are in debt but will deliberately avoid the issue – accumulating further debt in the process.
To pay off your debts quickly, it’s vital to get to grips with your situation as soon as possible.
Add up exactly how much you owe – including bank loans, store cards, credit cards and even money borrowed from family or friends.
By working out your monthly income, you can establish how much you can afford to pay back each month without getting yourself into further financial trouble.
2) Devise a Plan:
Unfortunately, there’s no universal answer regarding how you should start paying off your debts. Though there are a number of options.
One very sensible method is to pay the loan with the highest interest first, meaning, in the long run, you should end up paying less.
Alternatively, people with debts on multiple accounts often choose the ‘snowball’ method – where you concentrate on paying off the smallest loan first. By reducing the number of accounts to which you owe debt, your debts will be easier to keep track of.
Depending on your situation, it can also be worth considering consolidating your debts, before taking out a new personal loan to repay all of your outstanding debt through one single monthly payment.
Whichever debt-payment strategy you choose, the most important thing is always to devise and stick to a plan that ensures no payments are missed.
This is imperative as missed payments can add up and take you right back to where you started.
3) Get the Balance Right:
When you’re strapped for cash, avoid simply paying off the minimum amount required each month.
Not only will it limit your chances of getting out of debt quickly, it also leaves the door open for further financial turmoil.
Instead, live frugally by working out how much you can realistically afford to pay whilst still living within your means.
It’s important to get this figure right as you don’t want to pay so much that you’re left short at the end of the month and need to borrow again.
Putting aside significant time to assess your best course of action can make a huge difference when paying off debt.
4) Find Savings:
By simply looking at where you spend your money – and more importantly where you could be saving it – you could pay your debts back quickly.
Go through your bank statements and work out exactly what your money is being spent on, before identifying where savings could be made.
Are you spending more than you need to on your weekly food shop? Can you stop buying a take-out coffee every morning?
Often outgoings can appear insignificant but accumulating extra cash wherever possible can make a huge difference when it comes to paying off your debts.
5) Push Yourself:
The underlying reason for debt, boils down to spending more than you earn – so why not try and earn more?
Though spending more hours in the office can be daunting, working overtime can be a great way to quickly make some extra cash.
Working additional hours will also put you in good stead with your manager, meaning if any promotion opportunities come around, you could be first in line for a higher salary.
Additional income can make a huge difference when paying back your debts so even if a pay rise appears unlikely, consider looking elsewhere for a better-paid role.
Ultimately, by ensuring you’re rewarded fairly for the hours you work, you can rule out the prospect of your financial issues being hindered by your employment.
6) Ask for Help:
Asking for financial assistance can be tough – as often it takes accepting that something, somewhere has gone wrong. However, there are a number of people and institutions that can help:
- A financial advisor may use their experience to help look at your budget and determine which loans to pay off first.
- Alternatively, you can find resources and support via credit unions and non-profit agencies.
- Even those around you will be able to provide financial advice, as it’s likely that others around you will have been in a similar situation and may have useful tips to help solve your problems.
Although tricky, asking for help is a necessary step to paying off your debts quickly.
When paying off your debts, it’s important to manage one aspect at a time.
By simply taking the time to establish where your problems lie and how you can get around them an overwhelming problem can quickly become manageable.
Then use careful planning, determination, and the foresight to take advantage of extra earning opportunities, to ensure you can be debt free sooner than you might think.