How to Pay Off Your Debts

In the last post, we discussed ninja tactics to acquire debt. Now we'll talk about ways for you to pay your debt.

Track your expenses

Like I said before, you can never manage something you cannot measure. Your debt is related to your expenses. Therefore, listing down and analyzing your expenses will help you manage your debt better. A lot of people get into credit card debt because they treat it as free money. It’s easy to hand that plastic to the register, swipe it, then sign. Until the billing statement comes and all hell breaks loose. Make a list of all your expenses and track them on a daily, weekly and monthly basis. Analyze which ones you can live without and which ones you can't.

Snowball method

In this method, you pay the loan with the smallest balance first. Just as a snowball is rolled and piled together to create a bigger snowball, the snowball debt method lets you start with the smallest balance to give you the confidence to pay bigger balances in the future. Paying off the smallest balance will make it easier and faster for you to pay down debt. For those who are new to saving and budgeting, starting small will ease you into the habit of paying your debts.

Consolidate Your Debt

Multiple banks provide this service of transferring and consolidating all your credit card debt into one bank. To get the most out of balance transfers, transfer all your balances to the bank that offers the lowest interest. This way you’ll be paying less in interest, which can save you a lot. Late fees for credit card dues start at around 3 percent a month, so it’s best to avoid sky-high interest rates as much as possible.

Use a part of your savings

Remember that in a savings account, you only earn 0.25 percent in interest a year, humiliatingly less than the 3 percent a month you pay in credit card interest. Consider using a portion of your savings to pay your debt down faster and avoid incurring the 3-percent interest a month.