5 Simple Tips to Help You Remove Debt

The Average American spends almost 12% of everything they earn on interest. That’s right, 12%.

Debt is the killer of wealth building and financial abundance, especially when it’s:

• Not getting paid off.

• Compounding it’s interest to make you owe more and more.

• Normalised to the point where you’re in the minority if you’re debt free.

It’s a serious burden to your financial future, and is something that you should pay more attention to if you’re trying to build your wealth.

But, like most things, where there is a problem, there is a solution.

Or several, in fact.

Here are 5 simple tips to help you pay off your debt in 2024…

Avoid Any New Debt

When removing debt from your life, the best place to start would be to ensure you’re not taking on new debt:

• Credit cards

• Personal loans

• Car loans

As this is going to make your task even harder.

A lot of things in personal finance aren’t to do with knowledge.

They’re based on habits, and discipline. In order to avoid this problem again, you’ve got to start by avoiding any new debt that you might want to be taking on.

Think of this as a long term lifestyle change, and getting out of the bad habit of continuously taking on debt to finance things, is a big step in the right direction.

With the exception of a mortgage, I’ve got one simple rule when it comes to my money.

If I can’t buy it with the money that I have today, I’m not getting it.

This could apply to:

• A new car.

• Clothes.

• Jewellery

• Holiday.

Anything like this.

If it’s something I don’t necessarily need, I’m not getting myself into debt to be able to afford it.

Work Out The Total Owed

Debt is ugly, and for a lot of people, it’s something that you’d rather ignore, and pretend isn’t there.

No more.

It’s time to give it the attention it needs for you to remove it, and with this, you need to start by working out how much you actually owe.

Make a detailed list of:

• Everything that you owe.

• Who you owe it to, and how long you’ve owed it for.

• At what interest rates.

This gives you an idea of the total workload you have in front of you, and more importantly, it enables you to order the debts in two different ways:

• Highest to lowest amounts owed.

• Highest to lowest interest rates.

These two orders will be important for the two debt repayment strategies we discuss further down the page.

For now though, this is an important step in breaking down where your money needs to go in order to pay off your debt.

Create A Budget

Creating a budget is perfect for getting to the bottom of your expenditure, and it will crucially help you with one thing:

Increasing your disposable income, the difference between your income and your expenses.

Your budget will give you greater knowledge on where your money is being spent each month, enabling you to:

• Identify ways of cutting costs.

• Have more money left over at the end of each month.

• Pay off your debt quicker.

When you’re making your budget, think one thing: disposable income.

Worship it, because it’s the key to freeing yourself from debt.

Reduce Your Interest Rates

There are several ways that, in the short term, you’re able to convert your debt into a debt with a lower interest rate.

If you’re struggling to pay off the debt with high interest rates, instead of ignoring it, it might be a good idea to:

Consolidate Your Debts

Consolidating debts involves combining multiple high-interest credit card or loan balances into one lower-interest loan, and paying this off over time instead.

This way, you can lower your interest rate, which will give you two benefits when it comes to removing debt:

• You’re paying less money in total.

• You’ll be debt free quicker than expected.

Ask Lender for a Lower Rate

If you have a good payment history and good credit, you may be able to negotiate a lower rate with your lender, for either a certain period of time, or even permanently.

This doesn’t affect your credit score, and won’t cost you a penny. There’s no guarantee you’ll be approved for this, but there’s no harm in asking.

A simple request could save you a tidy sum of money.

Balance Transfer Credit Card

You might want to consider transferring balances to a balance transfer card with 0% APR.

You’ll need to meet the card issuer’s qualifications, which often include having a good credit score, but this is a great way to remove the high interest in an instant.

Use A Debt Repayment Strategy

This ties in with the second point about putting your debts in order of priority, and that is to create a basic plan which will get you to where you want to be: debt free.

Try these two proven debt strategies and see which one fits for you:

The Debt Snowball Strategy

A method that can help you knock out your smallest balances more rapidly, providing quick wins and reducing the total number of accounts you have to deal with.

It’s a strategy of getting a few small wins under your belt, before you go about tackling other debts which may take more time to pay down.

Although it isn’t the best from a financial perspective, many people prefer this as they can build on their own personal victories of paying down smaller debt accounts.

Highest Interest First

Like we spoke about, target the debt with the highest interest rate first.

It’s a bit like plugging the biggest hole in a sinking ship, so it’s the strategy I’d pick.

It’s the strategy that makes the most sense financially, as it’s the interest rates that determine which is the best debts to pay off first.

Some people may prefer the snowball strategy, and others may wish to get stuck in with tackling the debt with the highest interest rate.

Try both, and see what sticks for you.

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