How to pay off debt is a question that many adults are looking for an answer to. In fact, many studies suggest that credit card debt is a problem that many people, especially in the United States of America are struggling with. And so it is only natural for these people to try to find a way to get out of the financial mess that they are in.
Is there a way out?
There are different perspectives from which you can look at your financial situation. You may only be looking for a quick solution and not pay enough or any attention to the reasons that got you in such uncomfortable financial position in the first place. Or you can try to analyze your situation, review all the things that put you where you are and try to find a long-term solution to your financial difficulties.
Trying to find a short-term, quick fix solution to your problems with credit card debt may work quite good for some time, but it would definitely not have the needed impact on your financial situation in the long run. Even if you manage to get out of your debt rather fast if it is not done correctly and if you are only fixing your situation for the moment, it is likely that you will end up in a similar spot pretty soon.
Long-term solution and why it is a better approach
Ultimately, your goal should not only be to pay off all the current balances on your credit cards but to make sure to never get yourself in such situation ever again. In order to accomplish that, you would not only need to find and use certain financial tools and methods to repay the money that you owe to your creditors but also determine the bad financial habits that got you in this position and to try to improve your budget managing skills. Doing all that will not only speed up your debt repayment process, it will also help you to sustain a debt-free way of living.
Financial tools and methods for paying off debt
Let’s first look at some of the best methods and tools that you can use to get rid of all your credit card financial obligations. Mainly, there are two methods for paying off credit card balances that are often used by the majority of people that are going through such financial difficulty. They both consist of an approach to your debt repayment process, an approach that can get you the results that you want a lot faster and efficient. Your debt repayment process will have better results if you actually have a certain strategy that you follow all the way through from start to finish. Here are two ways that you can tackle your debt to boost your repayment process and to be few steps closer to your end goal of debt freedom:
Start from the credit card balances with the highest interest rate
While this may sound kind of risky and difficult to you as you are reading this, you need to think about what interest rate is and how it actually affects your whole financial life. Since the interest rate is where most of your money go, when you are repaying your financial obligations, it only makes sense to get rid of the one card balance that takes the biggest sum among all of your credit card debt. In order for this method to work, you would need to focus most of your funds towards the credit card balance with the highest interest rate, while making only minimum payments to all of your other debts. Once you have successfully paid off that highest interest rate credit card debt, you would need to repeat the same exercise over and over again until there are no more debts left to be repaid.
Start from the credit card debt with the smallest amount
This method, as you can guess, has a different strategy. Here, instead of attacking the highest interest rate credit card balance, you would need to list all of your current debts and turn your attention to the smallest credit card debt that you have. The strategy here is for you to be able to reduce the overall number of the financial obligations that you are carrying as soon as possible while gaining a much-needed momentum and confidence to keep you going until you reach your final goal.
Mistakes regarding your credit card debt repayment process that you need to avoid
Do not trust everything that your credit card company is telling you
Most credit card companies tend to advise their customers to only make minimum payments on their credit card balances. This may seem like a good idea, as it will allow you to easily manage your credit card monthly payments, leaving you with enough money to take care of all of your other bills. However, what you may fail to see and what your credit card company may intentionally fail to tell you is that by making only minimum payment on your balances, you are paying mainly if not only interest and you may not be even touching your actual debt. As you may guess, if you continue to make such monthly payments, you will not be reducing the actual amount of money that you owe to your creditors, which basically mean that you might as well keep repaying your debts for the rest of your life.
Think of the big picture
Now that you are aware of some useful debt repayment methods which you can easily implement in your debt repayment process so that you can speed it up and reach your goals a lot faster, it is time to talk about the changes that you need to do in order to sustain your debt-free financial living for a long period of time. The first thing that you need to understand is that if you want to pay off your credit card financial obligations in the fastest way possible, you would need to fully commit to that goal.
If you want to achieve something, you have to dedicate yourself to your goals. So in that case, if you want to get rid of all the debts that you are carrying and live a life without debt, you would need to make sure that you are putting all of your efforts, focus and commitment into achieving this goal.
Improve your budget management
If you are carrying debt on multiple credit cards, there are probably more than a single reason behind that. However, you cannot only blame the unstable state of the economic environment, as even though it may have played a big part in your indebtment, it is highly likely that you were also doing a poor job with managing your budget. So how can you improve your budget managing skills?
Start tracking your expenses and get rid of the ones that you do not need
It sounds so simple, yet so many people fail to do it. By tracking your expenses, you will be able to get a clear idea of exactly where all of your money goes. That way you would be able to set aside the important from the unnecessary expenses and minimize these expenses. This will give you an extreme financial boost as you would have more money to put towards your debt repayment and you will minimize the chances of getting yourself in such a situation ever again.