Whether it’s a mortgage, a car loan, student debt, or a large credit card bill, debt can definitely feel like added weight. Depending on your circumstances, a large portion of your income might be dedicated to just keeping up on your current debts.
Becoming debt free, or at least substantially lessening your total debt, is a very worthwhile financial goal. It might seem impossible at times, but with smart planning and a little extra work, you can do it. At Pioneer, we want to help anyway we can, so we've gathered some helpful tips to make a plan to become debt-free!
Start with your Budget
If you don’t already have one, make a budget. Every good financial plan starts with understanding the money you have coming in, what bills you need to pay, and knowing where the rest of your money is going.
Don’t know how to build a budget? Use the Money Management tool in your myPioneer Online Banking account to get started! It’s easy to use and great for understanding where your money is actually going. You can even set alerts to let you know when you have reached a budget’s limit for a specific expense.
Once you have a budget set up, look for areas where you could save money. Getting out of debt early requires putting more money toward these areas, and that money must come from somewhere. Look at “luxury” or non-essentials you can do without and use that money to lower your debts. This might mean living frugally for a while, but it’s money well spent in the long run.
Earn Extra Money
Whether it’s a side gig to earn a few bucks, starting your own small business, or picking up extra work at your job, increasing your income is very useful to decrease your debt. Even a few extra dollars here and there can help! Just don’t push yourself too hard. Getting out of debt a month or two early isn’t worth sacrificing your mental and physical health.
Focus on the Smaller Debts First
While still maintaining the minimum payments on all current debts, take the extra money you have from cutting costs or additional income and put it toward your smallest debt. Once that is paid off, take all the money you had going toward it and push it to the next smallest.
As the money set aside for paying off debt grows, you’ll quickly knock out most of your debts in no time. Then, once the smaller debts are handled, you can start putting that money toward large debts, like student loans or mortgages.
Putting Gifts and Extra Money Towards Debt
If you don’t have spare income in your budget, one way to make a dent in your debt is to use extra money you get throughout the year. This could include money for your birthday, a bonus at work, or selling a couch for a profit. Even getting a raise at work could be considered extra money for debt.
Instead of buying yourself something nice, put that unexpected money to your loans. An extra twenty bucks here and there might not seem like much, but simply getting ahead of your payment schedule can do a lot for your finances.
Consolidate your Debts
Not all debts are considered equal. Interest rates and loan terms are both things to be considered when planning your budget. A massive credit card debt could become impossible to pay off with high interest rates, and unfavorable terms from a bad or scam loan could mean a lot of headaches in the future.
Consolidating debt is moving existing debt you’ve accumulated from multiple sources - including credit cards, car loans, and personal loans - into one single debt. Basically, an institution decides to pay off your other debts in full with a new loan to you. This can make paying debt simpler with a single interest rate. If you have existing debt with high interest rates, consolidating it can help get your debts under control and lower what you’re paying in interest.
If you are looking to consolidate your debt, schedule an appointment or stop by at any branch to meet with one of our loan officers. They can review your situation, help you make a plan to lessen your debts, and get you started with consolidation.