5 Debt Payoff Plans that Actually Work

Coming to terms with your debt can be a hard task in itself- then add the next step of paying off your debt and it seems like an impossible feat. Well, first you need to make a solid, realistic plan on how you will pay it all off. Paying off credit cards, past due items in collections and managing your monthly cards correctly can be very overwhelming at first. Rightfully so, as paying off debt can be a process that spans several years. To lessen the stress and make this task a bit more manageable you need to make sure you have your plan in place.

1. Cut Spending Back to Bare Essentials

Cutting back your spending may seem like the first step, but many try to skip over this or they do not do it properly. Sit down with your bank statement and see what things you currently spend money on where you could be saving. From packing your lunch to lowering your phone data plan there are many options for you to pinch out a few more pennies. 

Every little bit counts, and it will add up overtime. If you want to get rid of your debt for good, then some of these changes need to be lifestyle alterations. You don’t have to have remove all your lives enjoyments. In fact, it is good to reward yourself occasionally. A coffee every Friday morning is going to make less of an impact on your spending than daily coffee and it gives you something to look forward to.

2. Debt Pay Off Apps

Just by doing a google search you will find dozens of online debt payoff planner options. Each option is designed to make paying off debt easier to handle and understand. These apps can provide great visual representations of your debt through interactive charts and tables. They also help you to see the difference your daily money decisions make long term. There are even apps that you can link with your bank account to save your ‘change’. 

These work by rounding your card charges up to your chosen amount and then it puts that money into a savings fund for your debts or goals. These planners are all great to help you come up with a plan and stick with it. Some resources are free, but more secure options can require monthly or annual fees. Be sure to choose with a well trusted option to avoid your personal information being compromised.

3. Stop Using Your Credit Cards

Seriously. Stop. It can be extremely hard to change spending habits, but it is the only option. Spending money you don’t technically have is a disaster waiting to happen. Credit lines should be used for emergencies only after you have gone through your savings. They can be important for transactions that need credit approval and for showing you have available credit. However, they are not to be used for shopping sprees or large purchases. 

Your credit cards are not your money, they are used to show how you handle borrowed money. It is a good rule of thumb for your credit card is to use less than 30% of your available credit. Credit card companies report your monthly used credit to the credit bureau and the bureau inputs that into your credit score. That means halting use on your credit cards can help you raise your credit score while being financially responsible.

4. Make Large Payments on Debts with High Interest

This step takes a bit more research and time, but it will reduce the time it takes to pay off your debt drastically. You will need to find a list of all the debts you owe and compare them to see which debt has the highest interest rate. An easy way to gather all your debts and compare them in one place is to obtain a copy of your credit report. 

You can get one credit report yearly for free from several online websites. It will lay out past and currents debts, your rolling credit account (credit cards), car payments and more dependent on your personal situation. Once you figure out the highest interest debt focus large payments on that account until it is paid off and then more on to the second highest interest and so on. Interest really racks up over time and paying large sums to a debt with high interest lowers the amount you owe in interest each month as well as the total debt.

5. Take It One Step at a Time

Finally, just take it day by day… or debt by debt. Pay one debt off and consider it an accomplishment. You can even celebrate your pay off- not by spending more money. Tackling all these accounts may seem like too much to handle but follow the plans listed above you can be on the fast track to becoming debt free. As this process will most likely take years to complete you cannot riddle yourself with stress during the process. 

This should be a positive time removing your debt that’s dragging you down- don’t let the payoff process drag you down more. Put a few plans into motion, no matter how small they may seem. If you stick to them your debt could be gone quickly but, keep in mind that these changes you make to your spending need to become life long changes if you expect to stay debt free.

If you have any experience paying off multiple debts, leave a comment and share any helpful tips or advice you may have.