When I had announced that I bought Financial Highway, I asked you which kind of topics you wanted me to cover. One of them, was to explore debt repayment strategies. Especially in these rough economic times, paying off your debt becomes the #1 priorities. So I sat down and started thinking about all the ways I know and use to pay off debt. There are also several the experimental debt repayment strategies included. Since I came up with a lot of ideas, I thought of listing all the debt repayment strategies that I know today then follow up with a full detailed post on each of them later on. As you will see, some are very basic while others are quite original.
#1 Flip and Pay Back Your Debts
The flip and pay back your debt strategy only works for a limited time. This is for people with credit card debt with high interest rate. By flipping your debts to a zero percent balance transfer credit card and maintaining your minimum payment, you will still end-up paying off your debt during the zero percent promotion. Unfortunately, these cards offer a low balance transfer rate for only a limited time period.
#2 Consolidate Your Debt
As a banker, I have seen many people lose control of their debt because they were taking too much time to manage the ten thousand statements they received per month instead of managing their budget to repay the debt. Consolidating all your debt into one loan with a fixed rate and determined amortization is a great way to clear your debt, once and for all.
#3 Snowball Debt Repayment Strategy
Snowballing has been one of the most popular debt repayment strategy over the past few years. Combined with a frugal way of living, it has a powerful impact on how fast you can pay off your debt. By concentrating your effort into a single debt until it is gone and use this extra money to pay off the next one, you are growing your monthly debt repayment pace each time you pay off a credit card.
#4 Use The Cutter To Pay Down Your Debts
Take your budget as is, cut down all the extra expenses and start a very frugal way of living. Use all the “unused” money towards your debt. The cutter is a very demanding debt repayment strategy but it is definitely effective!
#5 Track Your Expenses Like a Hunter
This is a slightly different strategy than the cutter since tracking down your expenses is done on a daily basis. Each time you are about to take your wallet out of your pocket, you think twice and each time you don’t spend your money, you take the same amount and apply it on your debt. This is a trick to ensure you always have your debt repayment strategy in mind.
#6 Remodel Your Life to Pay Back Your Debt
Instead of doing a classic budget review and cut where you can, do it differently. The classic way of cutting in your budget is to ask yourself: “is this expense necessary or can I live without this one”. While managing your budget is important, there is only so much you can cut when looking at your expenses this way. So try something new: Instead of starting from your established budget, start from a blank sheet of paper. Write down what you need each month and how you can manage it so it costs less.
#7 Make a Debt Repayment Schedule
This is definitely my favourite way to pay back my debts. I sit down and make a debt repayment schedule. I combine different debt repayment strategies together in order to get maximum results. I setup a plan so I know how much I will be paying every month and when I will become debt free. Having an objective, a date ensures your motivation is at its highest.
Do you know any other debt repayment strategies?
While I will cover these 6 debt repayment strategies in detail in the near future, I’d like to know if there are any other ways to pay down your debts you would like me to cover.