How to Pay Debt Faster
A famous quotation I read before said that “debt is the worst poverty.” In one side, it is true. Debt has been and can become a major problem of almost every person, companies and governments around the world. I don’t know your current situation but I assume you have debt now or in the past you have borrowed money from other people.
Debt is an obligation that should be settled by the debtor to creditor. Some people say debt can be good or bad depending on its purpose but at the end it is still debt that needs to be paid. You should not forget what you owed especially if the creditor is a friend, relative or a co-worker because it can ruin a relationship. It is one reason I think some people don’t lend money to their relatives to avoid the conflict at the end.
One best example of debt that should be paid as much as possible is credit card debt. These days there are many people using credit cards and it will continue to increase in the years to come. As a result, there is also increasing number of credit card holder who cannot pay their card bill because of numerous reasons. Lack of discipline and self-control are the factors that can result to a huge credit card debt. In my previous post, I mentioned there to avoid applying for a credit card if you are an impulse buyer because it can result to a big problem in the future.
I’m not against in using credit cards because it is really created for a good purpose. The only problem is card holders tend to abuse its usage and real purpose. I have one credit card, a Samsung Bonus Point Card, which earns a bonus point when I use it in partner establishments. When I was working in the Philippines before, I don’t have any credit card. I only use cash and debit card at that time because I’m afraid to default in paying the bills.
If you are in the situation right now of too much debt because of credit card and other debts that you borrowed in the past, you should follow some of the tips I will discuss below. I hope it will give you some ideas on how to pay your debt faster.
1. Stop using credit card
One of the easiest ways to get a debt is by using your credit card. In order to pay debt faster, you must cancel or stop using your credit card if you owe a big amount of debt. You can call your card company telling them you want to cancel your credit card so that you will not be charged for annual fee and other charges.
At first it will be hard for you to adjust since you have been programmed to use credit card as regular as possible but you should learn to discipline and control yourself so that you can pay your debt faster. The other alternatives that you can use aside from credit card are debit card and cash in paying your purchases.
2. Pay first the debt with small balance
The idea of paying debt with smaller balance is to give you encouragement that you make progress after finishing the payment for that debt. Some people called this the “snowball method” because as you finish paying debt with smaller balance, your capacity to pay for a bigger balance will be more possible.
To explain more, for example, you have $500 credit card debt and you have a salary loan of $200. The strategy of snowball method is to pay or prioritize the payment of your $200-loan while paying the minimum payment for your credit card debt. After you finished paying the salary loan, you must add the money that you used to pay from that loan to the money that you will use for the payment of credit card bill.
3. Plan your spending
If you carefully plan your spending, you can avoid getting a big amount of debt. Most of the time uncontrolled spending leads to more credit card debt as a result of impulse buying. Once you have a plan and you will stick to it strictly, you will have a bigger chance to incurring debt from your purchases.
You may set a maximum limit on your spending month so you have a figure that you can work on. Make it realistic and achievable depending on your current situation. It will be better if you can list all your expenses in a spreadsheet so you have record of what you purchased.
In my family’s case, we use spreadsheet in Google Docs to record our monthly spending so that my wife and I know where does our money goes for each month. It gives us clear picture on which expenses we spend money the most.
4. Increase your income
Increasing your income is another factor in paying debt faster because you have more money that you can use in paying your debt. There are many ways on how to increase your income. You can do overtime if your company and your job permits it, do part-time jobs, sell someting in eBay, make money online and a lot more.
One thing I would like to emphasize is that you should keep your expenses as minimum as possible as you increases your income. It will give you no good and will not help you to pay your debt faster if you increase your spending as you also increase your income.