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Paying off debt may seem unrealistic, frustrating and confusing if you do not have a plan in place. I am often asked, “How to eliminate debt when first getting started?” There is not a secret or a one-size-fits-all plan, but the easiest way for me is using the snowball method.
The snowball method is listing your debts from small to largest, regardless of the interest rate. You start by attacking the small debt first while making minimum payments to all your other debts. Once the smallest balance is paid off, you begin paying off the next one, adding your previous minimum payment to the next smallest debt. As you move through this step, your payment, or snowball, begins to grow and you will be able to eliminate all your debt in no time. This method definitely helps build momentum compared to others!
How to eliminate debt when you’re first getting started
Document your current debt
Look through every statement and record each balance. Then sort them from smallest to largest. Do not consider the interest rate.
Stop using credit cards
In order to see a decrease in your balances, you cannot establish any new debt. Create sinking funds, or savings accounts, for those larger expenses you would normally charge.
Create a zero-based budget
Zero-based budgeting doesn’t mean that you’re spending every dollar that you earn. You are simply assigning a job for every dollar. Use the average amount you have spent money on in the past three months for the variable expenses that are not fixed to help you get started.
Pay more than the minimum
What is left after your monthly expenses should go directly to debt; no questions asked. If you do not have any money left over, or your expenses exceed your income, get a second job, declutter your home and sell used items on Mercari, or utilize cashback apps such as Dosh, Ibotta or Ebates for extra money to put towards debt.
Get an accountability partner
If you are really serious about learning how to eliminate debt, get an accountability partner. Knowing you are working alongside someone with similar goals will give you the drive needed to keep going. The #debtfreecommunity on Instagram is a great place to start.
- How I paid off $18K worth of credit card debt in 8 months
- 6 reasons why your budget isn’t working
- 10 ways to trim your monthly expenses today
If you want to know how to eliminate debt, start with these steps and see if they work for you. It may take you a few tries to perfect them, but do not give up. Your hard work and dedication will soon pay off.