9 Steps to Get Out of Student Debt Easily
Most of us has had student debt at one point or another. It is very important to tackle that debt early to make sure you don’t accrue too much interest. Not paying your student debt can land you in a lot of trouble. Here are some simpel steps to get you out of student debt early.
Step 1: List All of Your Debts
This should be a pretty obvious first move, but don’t let the simplicity of it get the best of you. Get a piece of paper, a Google Spreadsheet, or open Notepad on your computer. Go to the website of every financial institution to which you owe money. Then, copy down all balances with their respective APRs (interest rate) exactly as they appear. It’s also very beneficial to know what your minimum payments are for every account. After tracking down all of your debts, you’ll have a decent idea of how much is owed. Let it sink in, but don’t worry, in a few more steps we’re going to start getting rid of it.
Step 2: Set Goals
Becoming a goal-oriented person is one of the most powerful things you can do for yourself, in finances and pretty much every other area oflife.Goals allow us to break really hard things into manageable chunks that we can feel good about after we complete them.
When you set a goal to pay off your debt you first assess how much money you can contribute toward debt repayment every month. Then you can do a rough estimate of how long it will take you to get out of debt. (Debt / Monthly repayment = Amount of months until you’re debt free). Just understand it could take longer than this to repay your debt, but this is a good way to understand roughly how much longer you have to bare this burden.
The big goal—the final goal—is to pay off all of your debt. That should be the end point of your timeline. Then, it’s up to you what other goals you’d like to set. You could make every $5,000 mark a goal. Or every $10,000 for those with student loans. Once your goals are in place, they’ll be almost impossible to ignore. This will push you toward accomplishing your goals way faster than you would have originally anticipated.
Step 3: Start Paying Off Balances
There are a few trains of thought when it comes to the actual debt repayment portion. The first being: Pay balances low to high. This is dumb, because it doesn’t take interest rates into consideration. The second, and more logical: Pay off the debt with the highest interest rate first, then work your way down.
Make the minimum payment possible for every account, besides the one that you’re trying to eliminate first. This allows you to focus on it, and to lose the least to interest. I’ve heard of people going to debt consolidation counselors, and also of people who transfer all of their balances to new credit cards that have 0% APR for an introductory period. While in theory these ideas could work for you, they aren’t the best ideas. Just imagine for a second: Why would anybody want to give you an unsecured loan to consolidate your debt? Or a 0% rate?
Step 3.14: Every Time You Pay Off a Debt, You Have More Money to Put Towards Other Debts
This concept is known as “snowballing.” I think “avalanching” sounds cooler, so let’s call it that instead. Now, when you’ve paid off a debt, you’ll have freed up some money that you can now use in conjunction with the minimum payment that was already being made on the next debt down the list. Then when the next debt is paid off you keep the avalanche going.
Step 4: Trade in Expensive Items
Do you have a shiny new-ish car or two in the driveway? You can significantly reduce your total debt by trading in your car for something cheap. If you can get $18,000 for a trade-in, and you can find a $10,000 car on the lot then you just came into $8,000 to help you pay off debt. If you can trade-in two cars and concede to just having one you could double or triple this amount.
You can further apply this to boats, yachts, jet-skis, snowmobiles, Segways, or any other ridiculous self-balancing modes of transportation. Now isn’t the time to have toys. You can have toys when you’re debt free.
Step 5: Sell Almost Everything
Now that ALL of your big ticket items have been either sold or traded in for less expensive versions, you can start becoming a professional Stuff seller. American houses and apartments are filled with crap we don’t need. A good way to figure out what you do need: Carry around a notebook and write down every item that you use over the course of a given week. It’s going to be a lot less stuff than you imagine. The rest—the crap that added to the debt problem—has to go. It’s unnecessary and dragging down your recovery efforts. Get rid of the stuff. There’s always time for stuff when you’re debt free.
Step 6: Work Hard
This one is going to blow your mind: To pay off debt faster you can work more. Overtime,second jobs, babysitting, etc. Check out this article I wrote about how to make more money. Pretty obvious, right? More money, more debt repayment.
Step 7: Reward Yourself
Achieving your goals, no matter how big or small should be celebrated. Don’t take this to mean that you should go out and spend hundreds of a dollars at the Mall for paying off $100 of your debt. Instead, buy yourself a cup of coffee. For a free alternative you could guilt people into congratulating you by posting your achievements on Facebook.
Step 8: How to Use Windfall Money
My definition of windfall money is: Any money that you receive that didn’t directly come from your employment. Tax returns, bonuses, inheritances, birthday money, wedding gifts, whatever. If you are in debt then windfall money isn’t fair game. You should apply it directly to your debt. In most cases you’re getting free money to pay your debt. You couldn’t ask for a better gift, so don’t blow it.
Step 9: Breakdance PartyP
You’ve made it. All of your debt is completely paid off, so you officially earn the right to have a breakdance party. Turn on some old school Run DMC, have a friend flick the lights on and off, throw down a cardboard box, and start busting out your best Suicide Rubberbands (learn how to do that move from a 12 year old).
– Source ( LifeHacker.com)