How to Zap $1,000 of Debt Quickly
Curious about saying "Buh-bye" to $1,000 of any type of consumer debt? Let's explore how to get it done.
This story originally appeared on MarketBeat
How to Get Out of $1,000 of Debt Quickly
Did your 2021 start off like mine? We had to put our golden retriever down (I know, the worst!) and replaced the alternator on my van. So, we had a pile of vet bills. My long-suffering husband took care of the van but we still had to buy the new alternator.
Luckily, we were able to cover those expenses, but I often like to run through what-if scenarios, which drives my husband crazy:
What would we do if we didn't have the $1,000 to cover those expenses? What if we had to put it on a credit card? And couldn't pay the credit card at the end of the month?
I tell you this story because it's so easy to find yourself in $1,000 of debt — or more. However, don't let it spiral out of your hands. Take these steps to relieve a small debt problem so it doesn't blow up into a bigger one.
Step 1: Find out how much debt you really have.
I know this article promises a quick fix to squashing $1,000, but do you really only have debt to the tune of $1,000? When you start peeling back the layers of credit card debt and other consumer debt, you may realize there's more than what meets the eye. Do you have payday loans (golly, I hope not — those can wreak havoc on your life) or student loans as well?
While you're looking at your $1,000, you might as well pull out the balances for the other debt you have and make a plan to pay it all off.
Step 2: Commit to paying over the minimum balance.
You always want to try to pay more than the minimum balance you owe per month. Credit card companies want you to pay the minimum amount — but you don't want to do that because you want to get out of debt faster using this method.
Why? Let's go over a quick example.
Let's say you have $1,000 of debt with a credit card interest rate at 13%. Let's say you make the minimum payment of $50 per month. It will take you 23 months to pay off your balance and you'll pay a total of $133 in interest.
Now, let's say you make more than the minimum payment — $70 instead. It will take you only 16 months to pay off your debt and you'll only pay a total of $96 in interest.
Paying off your balance ahead of schedule expedites your payoff process and can save you a lot of money in interest over the long term.
Step 2: Tackle the highest interest rate first.
Now that we've got you fired up about paying more than the minimum balance on all of your debts, what interest rates do you see on your debts? You should clearly see the interest rates printed on your statements if you have student loan or credit card debt — or any other debt, for that matter.
Important to note for any type of debt you owe: Paying down debts with the highest interest rates first will save you on interest. Doing so also directs a larger portion of your payments toward the principal — the full amount you owe.
Step 3: Ask yourself how you can cut back.
What can you do to budget your already existing money so you can put extra toward your debt? Budgeting isn't exactly the most exciting buzzword that ever existed, but you can make it more fun by using a budgeting app to see where you spend and how you can curtail it.
For example, Mint jolted me back to reality one day — I realized I was spending $250 a week on groceries! Most of it was junk food! Grocery runs (not to mention Target runs) can suck a lot of cash per week. And are you really using that gym membership?
Step 4: Ditch the plastic.
Did your credit card debt get you into trouble in the first place? If so, you want to part ways. Give your credit card to a trustworthy friend, put it where you can't easily access it, or even cut it up if you can. Don't give into the temptation to spend!
Step 5: Put together a spreadsheet. Or track your progress in your app.
It's easy to have a lofty goal in your head. But when it comes down to it, you actually need to see your goal in action. It also helps you get more excited about your progress.
Write down your overarching goal, then every month, figure out what it's going to take to get there. If you can contribute $50 extra toward your debt, how long will it take to pay off $1,000 — with interest? If you have trouble making these calculations, your budget app can do it for you.
Step 6: Get your side hustle on.
You know a side hustle can generate additional income each month, but it does more than that. It can wow your employer and even build your personal brand.
What do you love to do? Whatever it is, turn it into your side job. Maybe you have a knack for designing company logos. Maybe you love tutoring kids in algebraic equations. Your options run the gamut.
Funnel all of your extra income toward your debt — not those new shoes! You'll find that $1,000 can melt away effortlessly with a little willpower.
You Can Zap $1,000!
Debt really is a four-letter word (especially when my husband is under the car, trying to put in a new alternator). However, you can't deny that you feel super satisfied when you accomplish your goal of paying off $1,000.
Employ all these steps. Get them working well, and you should say sayonara to your debt. You can do it!
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