If one of your financial resolutions is to become debt free in 2014, you may be looking at a pile of bills and fretting over how you’ll pay them all. Well, don’t despair. There are many techniques you can use to help eliminate your debt this year—deven if you have limited funds.
Try the following five strategies to wipe out your debt and get yourself on the road to financial health.
Strategy #1: Tap into “extra” cash coming your way
Now before you start thinking: “I’m broke! I don’t have any ‘extra’ money, so this strategy isn’t going to work for me,”… just hold on a quick minute.
Before you say you’re completely broke, consider three potential sources of funds:
1. Are you getting a raise this year? If so, use that “extra” money to pay down your debt. According to the consulting firm Mercer, the average employee received a 3% pay raise in 2013. And you likely will get one, since only about 2% of employers said they implemented pay freezes last year.
2. Do you typically receive a tax refund check? If so, start planning to file your income taxes so you can use that money to reduce debt in the year 2014. In 2013, the IRS says the average federal tax refund check topped $3,000. Couldn’t that go a long way in paying your credit card debt?
3. Do you have items in your house that you no longer want or use? If so, sell those things (on eBay, a yard sale, a consignment shop or wherever) and use the cash to help eliminate debt.
In other words, don’t just be a “hater” or a “negative Nellie” who can’t think creatively about how to use this strategy to your benefit. Naysayers and doubters will just stay in debt. Optimists and doers who keep an upbeat outlook and act positively will get rid of their debt sooner rather than later.
Strategy #2: Negotiate lower interest rates
Do you have very high interest rates that make it tough for you to reduce your debt? If so, call your credit card companies and simply ask for a lower interest rate.
At least this will lower the amount of finance charges you have to pay, making it easier for you to more quickly get rid of debt. (Here are my tips on how to negotiate and six things to ask from your credit card companies.)
Strategy #3: Use credit counseling or a debt management program
If your own negotiations don’t get you anywhere, you can try using a legitimate credit counseling service or entering a debt management program. With these debt relief options, your credit card interest rates will typically be lowered greatly, and your credit card bills will be consolidated into one affordable monthly payment.
Contact a reputable organization, such as the Association of Credit Counseling Professionals (ACCPros), for a referral to a licensed credit counselor in your area.
Strategy #4: Slash other expenses
When lingering debt (from the holidays or any other time period) cramps your overall budget, one creative solution is to cut other expenses. Any cost-cutting with other bills is what I call an “offset” – a savings that can be used elsewhere; in this case, your savings will help pay down debt.
For example: can you slash your cell phone or cable bill? What about your car insurance? Shop around and see if you can get lower monthly rates. (Also, see this article for tips on how to save money on a tight budget.)
Strategy #5: Reduce your normal spending
None of us can cut out spending entirely. You do have to eat, keep a roof over your head, stay clothed, etc.
But once excessive debt threatens to wreck your finances, it’s time to evaluate your total spending and look for categories of spending that you can lower. Can you reduce food costs in any way? Can you lower commuting expenses? Can you cut out any luxuries, like trips to the beauty salon or the barber shop?
Ultimately, it’s up to you to pay off those credit card bills and not let them hurt your finances or damage your credit. As difficult as it may initially seem, eliminating debt is doable—and you’ll feel so much better when it’s finally done.