1. Know How Much You Owe
Make a list of your debts, including the name of each creditor, total amount of the debt, monthly minimum payment, interest rate and due date. You can use your free credit report to confirm the debts on your list. Having all the debts in front of you will allow you to see the bigger picture and stay completely aware of your complete debt.
Don't create your list and forget about it. Refer back to your debt list periodically, especially as you pay bills each month. Update your list every few months as the amount of your debt changes.
2. Pay Your Bills On Time Every Month
Late payments make it hard to pay off your debt since you’ll have to pay a late fee for every payment you miss. This can lead to you falling behind on every bill very quickly. If you miss two payments in a row and your interest rate and finance charges can also increase.
If you use a calendar on your computer or phone, enter your payments there and set an alert to remind you several days before your payment is due. If you miss a payment, don’t wait until the next due date to send your payment. It could already be reported to a credit bureau. Instead, send your payment as soon as you remember to, preferably always before 30 days late.
3. Decide Which Debts You'll Pay Off First
Paying off credit card debt first is often the best strategy because credit cards have higher interest rates than other debts. Of all your credit cards, the one with the highest interest rate usually gets priority on repayment because it's costing the most money; but you may also want to choose a smaller credit card balance to see results sooner, it is your preference.
Without access to savings, you'll likely accrue more debt to cover an emergency expense. Even a small emergency fund will cover little expenses that come up. Work toward creating a small emergency fund - such as $250, then $500, then $1,000. Once you have that, make it your goal to create a bigger fund, like $2,000. You will ultimately want to build up a reserve of six months of living expenses, but we are realistic that for most, that is extremely difficult to do right away.
5. Believe You Can Pay Off Your Debt
Managing and paying off debt is typically a mind game. We so often know we owe so much, we feel we can't get out of it. Stick to your plan, revisit your budget and debts as you go, and remember you do this and live a debt-free life.