This post is part of a series on 13 money resolutions for 2013. One of my personal goals this year is to pay off more than $25,000 in debt, on top of my regular mortgage and loan payments. If you look at the goals tracker in the sidebar, you’ll see I’ve already paid $9,500, thanks to finalizing the sale of my Paris apartment at the end of December.
To reach my goal, I need to come up with about $3,000 each month—$2,000 towards my $25K goal and over $800 for my regular payments and credit card balances. While it might not make perfect financial sense since my interest rates are relatively low at under 5%, and my investments have a better return, I’ve decided I want to tackle this debt head-on and eliminate it in 2013.
I understand not everyone has the flexibility to decide between slow and fast debt repayments. Sometimes, it feels like there isn’t enough money to make significant progress, interest rates are piling on, and the balance isn’t decreasing as quickly as we’d like.
It’s time to take action. Doing the same things repeatedly won’t change your situation. If you’ve been following the earlier steps of the 13 money resolutions series, you’ve likely freed up some cash by cutting unnecessary expenses and finding better deals on what you need to keep. That extra cash isn’t earning you anything sitting in your checking account, so use it to pay off your debt!
Whenever you lower a monthly bill, keep pretending that bill is the same amount and put the difference towards paying off your highest balance credit card. Found an extra gig? Act like your income hasn’t changed and use the extra money to reduce your debt before you get used to having it. Saved money by doing your car’s oil change yourself? Put what the workshop would have charged towards your debt.
In no time, you’ll be hitting your financial goals for the year. The key is to not hold onto that money because it will quickly get spent on other things. Managed to reduce your data plan from $50 to $40? Set up an automatic debt payment for $10 on the same day the $40 comes out. Refinanced your mortgage? Keep making the old payments and save yourself years off the loan. Luckily, I don’t have early repayment penalties on my loans, so I can make frequent small payments. If you do have penalties, set up a savings account specifically for debt payments and make monthly or quarterly transfers.
There are many ways to tackle debt:
– Pay off the smallest balance first to build momentum, then move to the next smallest.
– Start with the highest interest debt and work your way down.
– Add a small amount, like $5 or $10, to your usual payment each month.
– Make bi-monthly payments on your mortgage.
All these strategies can help you speed up your debt repayment and reach your 2013 financial goals faster.
WHAT STRATEGIES DO YOU USE TO SPEED UP DEBT REPAYMENT?