50 ways to pay off debt

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Hanna Horvath, CFP®Managing Editor & Certified Financial Planner™Hanna Horvath, CFP®, is a certified financial planner and former managing editor at Policygenius. Her work has also been featured in NBC News, Business Insider, Inc. Magazine, CNBC, Best Company, and HerMoney.

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Want to pay off debt this year? You aren’t alone. In a recent Policygenius survey, Americans said their biggest 2020 financial goal is getting rid of debt.

Repaying debt isn’t as simple as waving a wand — it’s often a long-term strategy. But there are easy steps to help you pay it off in a short time frame. Whether it be credit card debt, student loans or a mortgage, here are 50 ways to pay off your debt this year.

1. Set an achievable goal

Be realistic about your debt repayments. Your credit score will still go up even if you make small incremental payments — and you won’t drain yourself of valuable savings.

2. Make a budget

A budget ensures you have enough money for essentials and helps you set aside extra for debt repayment. Try using this free downloadable budgeting spreadsheet to get started.

3. Use an app

Whether it’s to save spare change or manage your budget, using an app can help you keep money top-of-mind while you’re working on tackling debt.

4. Work to improve your credit score

Improving your credit score now can help you qualify for lower interest rates in the future. Here are five ways to bolster your credit in 30 days or less.

5. Try the avalanche method

This debt repayment strategy has you pay off your debts from highest interest rate to lowest. While it may take longer to see results, you’ll pay less overall and get out of debt faster.

6. … or the snowball method

Using this method, you pay off your debts in order from smallest balance to largest. Once you tackle a couple small debts in the beginning, you may have the motivation to chip away at larger bills. Just make sure you’re making the minimum payment on all your accounts.

7. Adjust your savings goals …

If your debt is growing at a higher rate than your potential savings, then it might make more financial sense to pay off your debt first before you start saving. This could mean lowering the amount you contribute to a savings or retirement account.

8. … & your investment contributions

The same goes for investing. Before you start investing for the future, cover the debts you have now.

9. Consider a balance transfer

Got credit card debt? One option is to transfer your credit card balance to a different card, usually with a lower interest rate. This will limit the amount of money you’re paying to interest. Note: You may have to pay a balance transfer fee, so make sure to read the fine print.

10. Negotiate your credit card interest rate

Try to negotiate a lower interest rate on you credit card with the card company. You’ll likely be successful if you’ve been a longtime customer and have a previous track record of making your payments on time. It won’t affect your credit score to ask, so it’s worth a try.

11. Check your credit report

The information on your three credit reports determine your credit score, which in turn help lenders decide what interest rates to offer you. So before you create a payment plan or try to negotiate a lower interest rate, make sure the amount lenders think you owe is actually correct. You can dispute anything that’s incorrect to get it updated or removed. Start here with this guide to reading your credit report.

12. Talk with a debt counselor

Credit counseling services are offered at low or no cost at credit unions, nonprofits and religious organizations. You’ll get free resources to help you create a debt management plan. Or, you can take matters into your own hands by …

13. Asking for a debt reduction

Sometimes, when you’re saddled with a lot of debt, it’s possible to negotiate with the organization to pay it down. For example, if you’ve just received a large medical bill, call the health care providers. Some will offer you a reduced rate. You can also negotiate an insurmountable tax bill with the IRS.

14. … but beware debt settlement companies

Debt settlement is the process of negotiating with a lender to settle your debt for less than what you owe. This sounds great, but it immediately lowers your credit score and a note remains on your credit report for seven years. Many debt settlement companies are also scams. Ones that are legit, like National Debt Relief and Freedom Debt Relief, are for-profit companies may charge higher fees for their services, which can take years to complete. Instead, consider debt consolidation.

15. Try debt consolidation

If you have multiple debts, you can bundle them into one monthly payment with a debt consolidation loan. This method isn’t for everyone — you’ll be taking out a new loan to repay your old ones — but it can lower your interest rates and help you pay down your debt faster.

Another benefit is that payments for personal loans for debt consolidation are typically fixed, so you'll know exactly how much you need to pay each month — unlike credit cards, which can have variable interest rates and minimum payments that fluctuate based on your balance.

16. Know your rights

The Consumer Financial Protection Bureau website has an entire section dedicated to debt advice — namely what to do if a debt collector is falsely claiming you owe a debt that you’ve either already repaid or have no obligation to repay. Staying in the know will keep you from paying money on a debt you don’t owe.

17. Use the three questions test for purchases

“Before I make any major purchase, I ask myself three questions: Do I need it? Do I want it? Or both? It’s got to be both for me to buy it,” said Warren Robbins, licensed adviser with Policygenius. By adopting his three questions, you can keep your spending in check.

18. Set it & forget it

Policygenius adviser Brittany Robb saves a substantial chunk of her paycheck through automation. “A large portion of my paycheck goes to a high-interest account I am only able to withdraw from twice a year,” she said. “Seeing the money add up is really motivating.” Tackle your debt in a similar way by paying it off through a separate account that you fund directly through payroll.

19. Look to the future

Personal finance writer and author Donna Freedman’s favorite financial advice? “Future You is going to be judging Current You. Harshly.” Keep future you in your head when making spending decisions.

20. Use rewards credit cards

The last thing you want to do is rack up more debt with a credit card. But if you're smart about how you use them, a credit card that offers rewards — whether it's travel miles or cash back — can help you save money overall and repay debt faster.

21. Put your credit cards on ice

Literally. Or, at the very least, remove your credit cards from your wallet. Store them in a safe deposit box while you pay down your balances.

22. Turn off one-click ordering

You can also delete auto-saved credit card numbers from online shopping accounts to reduce the likelihood of impulse buys.

23. Pay with cash

Having money in tangible form helps you realize how quickly your money runs out. Here’s a guide to going cash-only.

24. Try a no-spend month

Try to go an entire month without spending on anything but the necessities. You can start paying off debt this way — and you may not miss some of your regular purchases as much as you thought.

25. Build up your emergency fund

It may seem counterintuitive, but as you pay down your debt, make sure you’re also saving for a rainy day. Your credit card is not an emergency fund, and it’s important to have 3-6 months of expenses saved so a bump in the road doesn’t derail your plans to get out of debt.

26. Make it visual

Joshua Holt graduated law school with $200,000 of debt. To help motivate himself to pay it off, he cut 200 strips of paper, one for every $1,000 in debt and looped them together in a chain that hung in his apartment. As he paid off the debt, he steadily cut loops away. As his debt shrunk, the chain shrunk. The visual motivated him to keep going until the debt was gone.

27. Track your subscriptions

It’s easier than ever to rack up monthly subscription charges, from streaming services to art supplies. Make a list of your subscriptions (or use an app to keep track of them) and consider purging the ones you don’t use.

28. Leverage a work bonus

Put a chunk of your annual or quarterly bonus toward a high-interest loan.

29. Negotiate a higher salary…

If you haven’t negotiated your salary or asked for a raise recently, you may be leaving money to pay off your debt on the table. Write down all your accomplishments. You should also record contributions to company culture, and indicate areas where you’ve improved throughout the year. Bring all of this to your next employee review along with a salary range you’d be happy with.

30. … and, if that fails, change jobs

Not all employers are so generous. If you aren’t eligible for a raise, or if your supervisors come back with a number below your expectations, consider getting a new job with a salary you’re more comfortable with.

31. Use your tax return

If you get a tax refund this year, use a portion of it towards paying off your debt.

32. Consider a side hustle

There are plenty of low-commitment ways to earn cash on the side, like renting out your parking space. Just make sure you’re using this extra money to pay off your debts.

33. Reshop your insurance

One recurring expense you can easily trim is your home and auto insurance. Because insurance companies regularly reassess their rates, it makes sense to regularly check to see whether you can save.

34. Downsize your home

Whether you pay rent or a mortgage, downsizing can reduce your monthly housing costs. That may mean moving to a smaller home, or to a less favorable location, but those compromises may be worth it if it means a debt-free future.

Here’s how to know when to downsize.

35. Trade in your car for a cheaper one …

If you currently lease a car and the monthly payments are piling up, it might be time to trade in your ride for a cheaper one. Speak to your lessor or lienholder about the possibility of trading in your pricey ride for a less expensive or older model.

36. … or look for alternate forms of transportation

Are you spending too much money each month on gas, car insurance and general upkeep? Consider using public transportation. Even if you don’t totally ditch your car, the savings in gas alone are probably worth it.

37. Get a roommate

If you rent or mortgage payments are too much to manage each month, consider renting out a room if you have the space. A roommate can help pay the bills each month and cut your cost of living. Even renting out a room through a short-term rental site can turn into a significant source of extra income.

38. Make date night free

Instead of spending money on dinner and drinks, try swapping out your traditional date nights with a free activity. The money you save from skipping out on an overpriced restaurant can be spent minimizing your debt.

39. Shop secondhand

Avoid adding to your debt with new purchases by buying secondhand items. Not only is it cheaper, but it’s also great for the environment.

40. Use a debit card

If having a credit card feels like a spending free-for-all, try using a debit card. You’ll only be spending money you actually have, without accumulating additional debt.

41. Cut monthly expenses by doing it yourself

Hiring someone to mow your lawn, wash and fold your laundry or clean your apartment may save you time, but chances are it’s making it harder for you to allocate more of your monthly spend toward debt repayment.

42. Sell your old stuff

Declutter your home and make some extra money at the same time by selling possessions ) you don’t use anymore.

43. Open a high-yield savings account

While interest rates on high-yield savings accounts aren’t as high as they were a year ago, they will still help you grow your savings faster than a traditional savings account. And unlike a certificate of deposit, high-yield savings accounts won’t lock up your money.

44. Update your W-4 form

The information on your W-4 tells your employer how much income tax to withhold from each of your paychecks. Adjust your W-4 to ensure you’re getting the maximum amount of money each paycheck. Updating your W-4 is free, you can usually do it entirely online, and the IRS has an online withholding app to help you fill it out properly.

45. Cut banking fees

Banking fees can drain your savings account, leaving you with less money to put toward debt. Look for a bank that doesn’t charge an annual fee just for having an account. Watch out for ATM fees, overdraft fees and over-the-limit fees for charging too much to your credit card.

46. Ask for help

Sometimes you need to swallow your pride and asking your social network for help. Offer to put a repayment plan in writing and stick to it. You can try raising money through websites like GoFundMe or charities like RIP Medical Debt.

47. Work with a professional

If you’re feeling overwhelmed by debt, it may be time to turn to a professional financial advisor. A trusted professional can help you make a plan to move forward and work towards paying off debt.

48. Join the FIRE movement

The Financial Independence, Retire Early community embraces a financially minimalist lifestyle to maximize savings. Fans of the method cut cable, restaurant expenses and clothing purchases — anything non-essential to meet their savings (and debt repayment) goal.

49. Negotiate tuition

Get ahead of debt before it builds up by negotiating tuition rates. Often, financial aid packages for colleges and private schools are negotiable and can save you money. You may also qualify for discounts you didn’t know about, so do your research beforehand.

50. Use a personal loan as a last resort

While taking out an additional loan is not the best way to repay debts, it can be used as a last resort if your debt becomes unmanageable. Check with local banks and credit unions to secure a personal loan. Or consider reaching out to friends and family — but make sure you have a plan to pay them back before you accept a loan.

Image: Aaron Sollner

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