Written by: Guest | Best Company Editorial Team
Last Updated: November 25th, 2020
Guest Post by Kelan Kline
You may feel as though you are alone with being in debt, but you aren’t.
The average American has $5,700 in credit card debt.
With the average credit card debt being so high per person, it’s likely that you are paying hundreds (or more!) per month towards your debt.
But don’t stress, here are five ways that you can get out of credit card debt fast. Let’s take a look:
1. Make a plan for your money with a simple budget
We often think of a budget as a constraint, but in reality a budget can provide so much freedom, and making one is generally a lot easier than it sounds.
When you are creating a budget, it’s important to always look at the bigger picture. Ask yourself, what is my main goal? It’s safe to say that one of your goals will be paying off your debt, so make sure that your budget reflects that.
First, you need to find out where you currently stand with your finances. Grab your bank statements, from at least the last three months, and go through them.
Next, go through your spending, adding it up and taking note on the areas in which you are spending. You can use a simple budget template to do so, which is a great way to visually see where your money is going.
In your budget there will be bills that are the same each month, such as:
- Mortgage or rent
- Debt (minimum payments)
Then there will be payments that you make each month that can vary, such as:
- Kids' clubs
An important aspect of making your budget is using real numbers. Write down your exact expenses, don’t just put down “ball park” figures. This may take some additional time, but ensuring that your budget is realistic and true of your spending habits will help you more efficiently pay down your debt.
2. Cut your expenses to the bare minimum temporarily
When you’ve created your budget you may be surprised at how much you have been spending without realizing it. It’s tempting to declare that you are going to dramatically cut all of your expenses so that you can pay more towards debt — but this isn’t always the best idea. When you make drastic changes, you can find yourself wishing that things were back the way they were before and rebelling against the changes.
Therefore, it isn’t a bad idea to cut your living expenses to the bare minimum temporarily. Go through your spending and see what you can cut out for now. This may mean cancelling some subscriptions, eating out less, and cooking cheap meals at home.
3. Pick a debt payoff strategy
There are various debt payoff strategies that you can choose from, with the most popular being the debt snowball method or the debt avalanche method.
The debt snowball method includes paying off your smallest debts first and then moving on to your bigger ones. The reason that the debt snowball method works is because you get the psychological benefit of getting rid of some debt — you can celebrate paying off small debts, and feel a sense of accomplishment which can keep you motivated on chipping away at your overall debt. There is one caveat with this method that may not work for everyone: paying off your small debts first means that you aren’t prioritizing your high-interest debt, which would save you more money overall. However, the satisfaction of paying off some debt sooner than later may be a bigger win for some.
If you would rather focus on paying off your debt with the highest interest rate first, the debt avalanche method could be a good option for you. With this strategy you still make minimum payments on all your debts, but you pay a little extra towards your high interest rate debt until it’s completely paid off. You may not experience the satisfaction of paying off smaller debts first as you would with the debt snowball method, but the debt avalanche method is good because you can save more money over time by paying less interest.
There isn’t necessarily a right or wrong method — it’s all about finding out which one works best for you personally. You may even find that a mixture of the two works for you.
4. Consider debt consolidation
Ideally you will pay off debt without debt consolidation, but there’s no denying that this is something that you may have to consider at some point.
Debt consolidation is where you consolidate (combine) your debts together, and there are pros and cons to doing so. The pros are generally that you can negotiate better interest rates and therefore pay less towards your debt. The con is that in order to consolidate your debt you could receive an extended repayment term, which could result in lower monthly payments, but would also mean that you will be in debt for even longer.
The most common ways to consolidate debt are by switching to zero percent balance transfer deals by opening a new credit card with a lower interest rate, or taking out a personal loan.
5. Attack your debt by picking up a side hustle
Although cutting your expenses to pay debt is a great idea, you can help speed up the process by earning some more money.
Side hustles have become increasingly popular, as many people have started earning extra money in addition to their main job. There are so many different side hustles out there, and we recommend looking at the skills that you have and taking some time to think through your options before picking one.
The types of online side hustles that we love include things like:
- Freelance writing
- Answering surveys
- Dog walking
- Using money-making apps
- Starting your own business
- Teaching English online
- Lead generation
You can use the money that you get from the side hustle to put towards your credit card debt and get it paid off much faster.
These are a few ways to get out of credit card debt fast. Getting into debt is much easier than getting out of it, but that doesn’t mean that it needs to be all doom and gloom.
Make things fun and get your family and friends on board as well; that way you can work together and cheer each other on. The more people paying off debt, the better!
Kelan Kline is a personal finance expert and co-founder behind the family finance blog, The Savvy Couple. Since starting their blog in 2016 Kelan and his wife Brittany were able to pay off $25,000 worth of student loan debt in under five months and both quit their jobs to blog full-time. With his bachelor's degree in Business and Finance, The Savvy Couple is on a mission to help families organize and simplify their finances to live a life of freedom.