So, you have decided to pay off your debts in 2022.
The good news is that there are several tips and tricks for doing this. These tips can work when you are patient and disciplined, as it takes a lot of planning to pay off all your debts. But you can do this.
Here are the 8 tips and tricks that can help you get out of debt this year.
Note down everything in a spreadsheet:
Before you make any action plan to get out of debt, it's important to get a glimpse of your financial picture. Enter your monthly income, expenses, monthly payments on your credit cards, savings, etc in a Google spreadsheet.
Note down every expense—grocery, utility bills, Netflix subscriptions, insurance premiums, rent, credit card payments, etc.
Now calculate how much you owe on your credit cards, mortgage, personal loans, and payday loans.
Calculate your net income and check if you have enough money to pay off your debt. If you have enough money to pay back your creditors, do it. If you don't, you can explore various debt relief options like debt settlement, debt consolidation, debt snowball, debt avalanche, etc.
Update the spreadsheet every week or month to stay organized financially.
Stay focused on budgeting:
If your financial resolution is to get out of debt, you must create a budget to save money. It will be impossible to generate free income to pay off debt unless you save money.
There is a strong likelihood that the Fed will raise interest rates as the economy improves and inflation becomes a source of concern. Borrowing will become more expensive, affecting credit card debt and mortgage payments.
If you have credit card debt, follow a budget, reduce your irrelevant expenses, save money, and pay more than the minimum payment each month. The idea is to get your balance down so that higher interests on your remaining balance do not burden you.
Settle your debts:
Be it credit cards or payday loans, debt settlement gives you the option to pay a portion of your debt and get rid of it.
If you have good negotiation skills, go ahead and negotiate with your creditors for a lower payoff amount. The trick is to make creditors convinced that you're in financial hardship. You can expect to grab a fair deal if they believe that story. Creditors will forgive a portion of your debt in exchange for a lump-sum payment.
However, it's best to hire a law firm to settle your debts. They have attorneys with good negotiation skills and legal expertise to help you get the best deal.
Use a balance transfer card as your trump card:
Transfer your outstanding balance from your high-interest credit card to a 0% interest card. You can at least save on the interest. But go for it only when you are confident that you can pay off the outstanding balance within the introductory period.
Use the debt snowflake method:
If you receive a financial windfall, use it to pay off your debt. Whatever extra money you get, spend it toward your debt so that you can eliminate it by the end of 2022.
Stay focused on your big goal:
When your focus is something as big as paying off your debt, everything else should be your second priority. Spend less on everything. For instance, choose generic items instead of branded ones and cancel unused subscriptions. Lead a frugal life to save money.
Use a personal loan to consolidate your debts:
Shop around for a low-interest rate personal loan and use it to consolidate your unsecured debts into a single monthly payment plan. Check out the eligibility criteria and your credit score before applying for a loan.
Avoid making any impulsive financial decisions:
When you have a big financial goal like paying off debt, you have to be patient. You have to spend every penny carefully. If you want to splurge, you need to justify it. When you're going through a tough time, avoid making major financial decisions as you are not in the right state of mind. I would suggest avoiding making any decision when:
- You have lost a loved one.
- You or your loved one are not well.
- You had a painful breakup.
- You are in a new relationship.
Impulsive financial decisions will get you into debt rather than take you out of it.
The Takeaway
Follow these eight tips, pay off your debts, and change your financial destiny in 2022. If you stay motivated and disciplined, no one can stop you from reaching your goal.
