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How to pay off debt: 9 tips for success

Most Americans have some kind of debt. Here’s how to pay it off

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We would never describe you, dear reader, as average. But you might resemble the average American in one way: Having debt.

In fact, the average American owes over $90,000 on auto loans, credit card bills, and more. And when debts pile up that high, financial freedom can feel out of reach.

But no matter your financial situation, you can achieve a debt-free life. You just need the right debt management tools and strategies to get there. In this article, we outline several tips that can put you on the fast track to eliminating your debt — for good.

In this article:

1. Create a budget

A failure to plan is a plan to fail, they say, and the first step toward getting out of debt is making a debt management plan by sitting down and figuring out what you owe, and how much of that debt you need to repay each month.

The tips below will help you find a reasonable amount, but you’ll also need to factor in your monthly take-home pay, and figure out regular expenses like bills, groceries, dining out, etc.

Figure out where, if anywhere, you’re spending money unnecessarily (do you really need all those streaming services?), and where you can potentially cut back. (Maybe you bring lunch to work, rather than dining out.)

Once you have a sense of both your income and expenses, you can begin making a budget that includes a plan to pay off your debts.

2. Pay more than the minimum payment due for your monthly payments

It might be tempting to make the minimum monthly payment on any debts you have, especially if that minimum payment already accounts for a significant percentage of your available take-home pay.

But doing so means prolonging your debt. Instead, focus on one debt, and pay more than the minimum due each month until you clear it.

3. Aim to get rid of the most expensive debt first

Related to the above: Not all debts are equal. High-interest loans and credit card debts cost you more than low-interest debts over the same period, because that interest compounds.

Instead, short-circuit a lengthy repayment process by prioritizing eliminating your most expensive debt. This approach, called the Avalanche Method, is recommended by many financial experts.

4. Or focus on the smallest debt

Maybe your student loan is where you owe the most money (and the highest interest rate). But you have a small personal loan (with a lower interest rate) that you could pay off in a couple months.

Many experts recommend focusing on that small debt first, so you can score an easy win and avoid losing even a small amount of money to regular interest payments. Doing so will help free up that budget, or even let you put more money into those high-interest debts.

This is called the Snowball Method, by the way, and you can probably figure out why.

5. Don’t let your bills get behind, and pay them off as soon as you can

One thing you don’t want to do while paying off old debts: Create new ones. This can happen through sheer inattention (maybe you missed a bill in the mail), or if you’re struggling to rein in spending. (It happens, especially when dealing with unexpected expenses like car repairs.)

Avoid falling behind on regular bills by signing up for autopay, then make sure you have enough money in your account when the due date comes. (You can also sign up for overdraft protection at your bank, just in case.)

6. Stop using the methods of payment that put you in debt

Did uncontrolled credit card spending put you into debt? Or was the buy now, pay later option at checkout a little too tempting? Then ditch those payment methods and stick to using your debit card.

You don’t want to get out of debt just to rack it back up again. And with debit, you can’t spend what you don’t already have. So if you don’t trust yourself with other payment options, don’t use them.

7. Find ways to increase your income

The reality is, especially in the early days of paying off debt, is you might owe more than you make. (This, after all, is how many of us get into debt in the first place.)

Doing all you can to reduce what you owe is only half of the equation. Bringing in extra money is the other half. If a new job or a promotion seems out of reach, you can try bringing in extra cash by:

Every little bit helps.

8. Restructure your loans

Generally speaking, there are two ways to do this:

1, Look into refinancing your debt. You might qualify for a lower interest rate, or be able to shorten the term of your loan, which reduces the total amount of interest you’ll pay. (Remember: Interest is essentially the money you pay to get money, so you want to pay as little as possible.)

Keep in mind this might increase your monthly payments in the short term, but you’ll ultimately owe less over a shorter period of time.

2, Consolidate your debts. The idea here is that you combine multiple debts into one debt, ideally with a lower overall interest rate, through a personal loan from a bank.

We suggest you talk with a financial advisor or an accredited credit counselor before taking this step, as debt consolidation is not without risk.

9. Look into early withdrawals from your 401k

Generally speaking, you don’t want to make early withdrawals from a 401(k) account. You pay income taxes on the amount you withdraw, plus a 10% penalty if you’re younger than 59 1/2. But there are a few situations where covering your debts with money from your 401(k) makes sense, including if you:

Each of those comes with serious consequences, like court action, wage garnishment, and the loss of assets you put up as collateral for loans. You may save more by paying the taxes and penalties to withdraw from your 401(k), but think of it as a last resort.

Working toward a better financial future

If you’re in debt, it might seem like adding an expense like monthly life insurance premiums is a bad idea. But you might be surprised to learn you can’t afford to do without it.

That’s because, if something were to happen to you, your debts would become someone else’s responsibility — likely a spouse or even your child (if they’re grown). How would they pay off those debts? Term life insurance is an affordable way of providing financial protection to your family, even if you’re not around.

At Haven Life, a 25-year-old woman in excellent health can get a 10-year Haven Term policy with a face amount of $250,000for $8.60 per month. That’s less than most people spend on coffee, and it will cover the years ahead while you’re paying off those debts.

Begin your journey toward peace of mind by getting a free online quote today.

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About Lindsey Horner

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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit:

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