4 Steps to Conquer Your Debts and Travel More

Guest

Last Updated: February 22nd, 2022

 

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Guest Post by Ben Walker

Everyone deserves a vacation. Or at least that’s a common sentiment. But travel doesn’t come cheap, and it can seem like an unreachable goal if you’re in debt.

According to the Federal Reserve, U.S. household debt balances climbed above $15 trillion in 2021. This included debt from mortgages, HELOCs, auto loans, credit cards, student loans, and more.

If you’re dealing with paying off debt from any of these sources, you might find it difficult to understand how you can also work toward other goals, such as traveling. Rather than trying to do both things, consider removing your debt once and for all. It likely won’t be easy, but it’s possible. Here are a few steps to get started:

1. Identify your debt

If you want to get out of debt, you need to know what type of debt you have and how much you’re dealing with. Before the start of any journey, it makes sense to get organized so you know how to get to the end. For your debt journey, you want to know exactly what you have to pay to get out of debt.

This might be easy if you only have one major debt, such as a home mortgage. You simply have to check how much you’re paying each month and multiply that amount by the months remaining in the loan term. But if you have multiple debts, including credit cards and other loans, it could take more time to gather the information.

Write down each type of debt you have and how much you owe. Another detail to add could be to organize each debt by how much interest you’re paying. Depending on your plan for paying down your debt, you might want to pay off the debts with the highest interest rates first (more on this below).

2. Create a budget

Now it’s time to identify and organize everything to do with your income and expenses. To properly tackle the challenge of paying off debt, consider how much money comes in and how much money goes out on a monthly basis. This includes identifying all sources of income and your total income amount, as well as finding your total expense amount.

Knowing exactly how much money you make and what it’s spent on might give you ideas on how you can spend less of it. For example, you might not realize how many monthly or annual subscriptions you pay for — are they all necessary? Is there another area of your budget where you didn’t realize you spend as much as you do?

Take a focused look at your finances by searching bank and credit card statements. This can help you identify where changes might need to be made. Then it’s down to making decisions, such as cutting certain expenses so you can save money. And then your saved money can go toward paying down debt.

Learning how to budget provides you with a lifelong resource. In one situation, it could help you pay off debt. But applied in different scenarios, budgeting could also help you avoid getting into further debt, including avoiding debt while traveling.

3. Start a saving habit

Now it’s time to save, save, save all the money you can in an effort to be rid of your debt as quickly as possible. Part of starting any habit is setting goals to help you get there. In this case, your ultimate goal is to pay down your debt and, hopefully, stay out of debt in the future. Achieving this goal could pave the way for reaching other goals, such as traveling the world.

But what should your saving goals be? It likely depends on your total debt and how much money you can afford to save each month. Because you already know how much debt you’re in and you’ve gone through the budgeting process, you can calculate how long it will take to be debt-free. The key here is to stay consistent, hitting your monthly saving goal or even exceeding it.

How can you exceed it? Make more money so you have more savings. Picking up a side hustle or finding ways to decrease your expenses are options to help pad your monthly savings.

4. Choose a plan

There are many different strategies and plans for paying off debt. Here are a few to consider:

  • Debt avalanche — Make the minimum payment for each debt you have and then put any remaining funds toward the debt with the highest interest rate. Once that debt is paid off, move onto the debt with the next highest interest rate. Paying down your debts with the highest interest rates first could help you save the most money in interest charges in the long run.
  • Debt snowball — Make the minimum payment for each debt you have and then put any remaining funds toward the debt with the lowest balance. Once that debt is paid off, move onto the debt with the next lowest balance. Paying down your debts with the lowest balances first could help keep you motivated to continue working toward your financial goals.
  • Debt consolidation — With debt consolidation, you typically combine all your debts into one location, which could be a new loan or a balance transfer credit card. The purpose is to help organize your debt, reduce your number of monthly payments, and potentially get a lower combined interest rate.

There’s not necessarily a best plan for paying off your debt. The best option for you is typically the one that helps you stick to your goals.

Helpful travel tips

It’s important to keep a few things in mind if your goal is to travel after paying off debt. Because traveling can be expensive, make sure paying for a trip doesn’t severely change your budget or put you back into debt. Here are some tips to consider:

  • Use travel credit cards. As long as you never carry a balance and make on-time payments, using the right credit card can make all the difference for travelers. The best international travel credit cards offer useful benefits and rewards to help offset your travel expenses and enhance your experience.
  • Use travel apps. Technology, including certain travel apps, can help keep your travel stress-free and more enjoyable. From Google Maps to Uber and beyond, there’s likely an app you can use to find activities, research hotel options, or solve another one of your travel needs.
  • Consider travel insurance. Travel isn’t always predictable, which is unfortunate considering how much it can cost. But with travel insurance, your investment is more protected.

The bottom line

It’s possible to travel while in debt, but it might not be the best option depending on your situation. Because traveling typically costs a fair amount of money, it likely makes sense to pay off big debts before you travel. This can help remove the burden of debt from your shoulders so the only stress you have is planning a trip to your dream destination.

Ben Walker is a credit cards and travel writer at FinanceBuzz who loves helping others make informed and financially sound decisions, especially when it comes to traveling the world. He does this by explaining key principles involving credit cards, budgeting, banking, insurance, investing, and more.

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