There are two schools of thoughts when it comes to debt elimination. The first is to pay off the smallest balance first. This will help you to have the sense of accomplishment and provide confidence as you see progress towards your end goal. The second way is to pay off accounts with highest interest rate first. This will eliminate the most expensive account, helping to save on the highest interest rate.
Firstly, you need to know what is your inflow and outflow, you need to know exactly where you are spending your money each month in order for you to make better decision. You need to create a budget to understand how much money you can spend and how much you will be left with. You can spend money on things that are important to you while cutting out things that are. You might be surprised at how much money you can find to pay towards debt when you spending with intention.
Sometimes we all need to burn the ships if we are bend on getting out of debts. For instance, if you know that you need to repay $1,000 every month, you need to set aside $1,000 from your net monthly income automatically once the money comes into the bank account. Then live within your means based on what is left.
Explore different options to refinance your debt to see whether it would save you money. The less interest you pay the more you can save for your investment which speeds up your process towards financial independence.
Are you getting a bonus or windfall? You need to put the extra money to pay off your debt instead of buying luxurious stuff, vacation, or home upgrade. If you want to speed up in terms of clearing your debt and stop incurring more interest, you need to pay more than the minimum balance, every extra dollar you pay means paying lesser future interest.
If you are having multiple credit cards’ debt, can you transfer your balance to a card with lower interest. After debt consolidation, then you just pay the lower interest rate which can help to save a lot of money on monthly interest charges. Thereafter, cut those credit cards without any outstanding balance but do remember to terminate them! You will be surprised on how fast you can pay down your credit card debt when you do not carry the card around you.
Refer back to here on Steps to Achieve Financial Freedom.