The Lord will open the heavens, the storehouse of his bounty, to send rain on your land in season and to bless all the work of your hands. You will lend to many nations but will borrow from none. (Deuteronomy 28:12)
In a previous article, I shared how easy it is for us to just coast into debt without even thinking too much about it. But on the contrary, it is not that simple to coast out of debt. Getting out of debt requires a strong will and determination. How exactly does one dig oneself out, especially when one appears to be drowning? Here are a few steps:
- Write down the debt number. You must first face the music. It might be scary, but at least you know what exactly you are dealing with. Make a list of all your debts, showing the balances, minimum monthly payments, and most importantly, the interest rates you’re paying on each balance. Total all debts owed, be it unsecured loans, credit cards, student loans, car loans, hire purchase plans, etc.
- Make a debt repayment plan. There are three popular debt payoff strategies:
Debt snowball: Paying off the lowest balance first
Debt avalanche: Paying off the loan with the highest interest rate
Debt consolidation: Roll all debts into one.
These strategies will be viewed differently by individuals.
- Make a realistic budget. This will allow you to consider the affordability to pay down debts in greater proportion much faster. After all, you need to eat and pay for your housing and other necessities.
After crafting that realistic budget and determining your repayment strategy, you can now aggressively pursue debt repayment. Commit to making payments more than the minimum payment requirements. In this way, you will be on your way to paying down debt quickly.