15 Simple and effective ways to get rid of debt quickly

Being in debt can be unsettling and frustrating, making you insecure about your financial future. However, it is surprisingly easy to find yourself in debt at any age. For young adults, having easy access to personal loans and credit cards makes shelling out cash you don’t have effortless. If you have a limited income, you may be finding it hard to balance your expenditure with monthly bills for food, going out and rent. Older individuals could be plagued by family expenses such as home loans, hospital bills due to major illnesses or children’s education fees. 

Before you know it, spending more than you can afford becomes standard. And worrying about your lack of money is always at the back of your mind. However, it doesn’t have to be this way. Here’s how to gain control of your finances, clear debt fast and make being debt-free in the long-term the new normal.

Gather your data

Gaining control of your debt starts with understanding your spending. Armed with this data, you can easily see the items that drain your cash and where you can make cuts to clear debt fast. Track and make a note of all your expenses, big and small. This should include monthly as well as yearly spending. Gather your recent bank statements from across your accounts. Itemize your regular incomings and outgoings, including your salary, rent or home loan, vehicle EMIs and grocery and household bills. Do the same for your once-in-a-way expenses, such as money spent going out with friends, on holidays, buying a mobile phone or clothes. 

List your debts

Make a list of all of your debts and how much you owe, including any credit card debt. For each type of debt, note your monthly repayments and interest payments. This will give you a clear picture of how much you’re paying simply to borrow money. 

Define a budget

Once you have an understanding of your incomings and outgoings, you can start to plan on how to get rid of debt quickly. Your irregular expenses will vary month-to-month but your data will show some key areas that drain most of your remaining cash. For example, you may not realize how much you have been spending on going out with friends, ordering food or clothes shopping. Life would be no fun without these, so instead of eliminating them, set a budget. For example, decide to have two dinners out per month or one clothing item a month and keep track so you don’t exceed your limit.

Set priorities

Add together your required monthly outgoings – those which you can’t live without. For example, home loan or rent, food costs and electricity bills. Then deduct this figure from your total monthly income. The amount of money you have left is the maximum amount that you can use to pay off your debts so try to stick as close to this figure as possible. Prioritize which debts you clear first by the amount of interest you’re paying on them. It may make sense to focus on paying off a loan with a high interest faster, however, do your research. A very large lump sum for the prepayment of a home loan could be invested to earn higher returns that could cover the interest rate of the home loan. The payments for loans also shouldn’t eat into your emergency fund.  

Practice sustainability

Budgeting teaches you is how much you can save by simply questioning what you really need! Rethink the ‘use and throw’ mindset to focus on sustainability and conservation. This is so true of grocery shopping, where it’s easy to overspend only to end up throwing out food. Avoid this by being organized, making a list and planning ahead for meals. Use up or freeze leftover food for later to save money. Cooking your food from scratch will also ensure wholesome, satisfying meals that are easy on the pocket. Other ways to practice sustainability and conserve your money is to constantly question what you buy. A trendy new t-shirt, a beautiful bedspread or flashy new mobile phone on sale may seem like a bargain but unless you really need it you’ll be spending money that can go toward paying off debt.   

Shop around for providers

It can be tempting to stick with the same providers for years but looking around could save you more money than you realize. For example, switching your internet or telecom provider could save you hundreds if not thousands of rupees a month. This can add up to a substantial amount over the year. Check your service plans and ask friends and family about the rates they are paying. Then evaluate your own big monthly outgoings and switch to more reasonable subscriptions to ensure you’re not paying more than you need to.

Try to negotiate with your credit card provider

It is not uncommon to ask for lower interest rates from your credit card provider, especially if you have a good credit history. If this doesn’t work, check whether a balance transfer makes sense. Some providers may even give you a deal of 0% interest rate for a few months (you may have to pay a processing fee). It makes sense then to pay off your initial debt with a new provider and focus on finishing your transferred debt within the interest-free or lower-interest period.  

Limit or stop credit card use 

If you’ve gotten used to swiping your credit card without a second thought it’s time to curb this harmful habit. Use only your debit card to pay so that you register how the money you are spending is impacting your bank balance with each purchase you make

Use all bonus cash for debt payments

Yearly bonuses, a bump in salary or inherited money should all go toward paying off your loans. You may be tempted to treat yourself with this extra cash but focus on the satisfaction of being closer to a debt-free future. 

Invest wisely 

If you do happen to receive a large sum of money through a one-time occurrence such as inheritance or sale of property, you may think it’s better to invest it over sinking it all into clearing your debts. However, interest rates on personal and home loans are significantly higher than what you can get from even the best-performing investments. And you would need a large amount of money to actually be able to cover your debt through gains from investments. If you are keen on investing, set aside a portion of your money for that purpose. This gives you a chance to pay off your debt at a faster rate as well as benefit from good returns in the long term, giving you some security and flexibility for the future.

Embrace your talents

Are you a good cook? Do you have a knack for gardening? Or maybe you are good at teaching kids? Use your talents to make some extra cash that can go toward paying off your debts. For those who have the time, small jobs like taking food orders, maintaining the neighbors plants or taking tuitions for kids online can bring in some much needed extra income.   

Sell items you don’t need

We all have stuff lying around that we have no use for. Maybe you’ve bought a treadmill during the lockdown that you’ve never been motivated to use. Parents may have baby equipment like a crib or playpen that their child has grown out of. Young couples often sit on fancy appliances and glassware gifted for their wedding which stay in their boxes for years. Sell off extra stuff on websites such as Olx.in and Quikr.com and use the extra cash toward your debt payments. 

Be aware of your weaknesses 

We all have those one or two things we can’t resist – trendy shoes, a favorite clothing store, online shopping, expensive coffee, new gadgets or home accessories. Identify your biggest spending temptations and stay away! If you allow yourself to spend on them “just this once”, you won’t succeed in breaking bad spending habits.  

Maintain good habits

Once you’ve gotten into the habit of clearing your debts, you will likely want to keep it that way! The trick here is not to allow yourself to become too laidback. Getting rid of your debts will have instilled some good habits into your lifestyle, such as budgeting, planning and being careful about what you spend your money on. Don’t let these good habits slide. 

Get good money advice 

If you are in debt, it’s easy to feel overwhelmed by the lack of control you have over your finances. Seek out advice from trusted friends or family members who are knowledgeable about money matters. Ask them for guidance on how to navigate toward a debt-free life. Having knowledge will reassure and motivate you toward your financial goals. Also, use free online resources to help you learn more about debt payments and investing.      

Be prepared for the unexpected 

Even if you have debt, don’t ever skimp on what is necessary to protect you financially in the long term such as insurance. For example, making sure you have good health insurance can protect you in the future in case of unexpected illness and hospitalization. It will ensure that you are not faced with the burden of huge medical bills if an unfortunate medical event occurs.