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Carrying substantial debt is all too common in the United States. For American households currently in debt, credit card balances average over $16,000. As if this wasn’t sobering enough, the average mortgage debt averages more than $150,000, and average student loan debt is more than $30,000. If you’re feeling like you’ll never be debt-free, take heart. With a few smart strategies and tools, you can eliminate debt for good.

Free-Up Cash

When you don’t have enough surplus cash for more than minimum payments, try these two options: 

  • Reduce expenses: Consider eating out less often, substituting home movie nights for movie theaters, finding cheaper cable or cell phone plans, and enjoying free or low-cost sporting events, concerts and other programs at local schools and libraries.
  • Increase earnings: Grab overtime at work, take a second, part-time job or switch to a better-paying primary job. 

Get on Budget

Budgeting helps you mobilize a debt-reduction plan and stay on track. Subtract monthly expenses from income and commit a portion of the surplus toward debt reduction. Mobile banking tools from financial institutions like Southeastern Federal Credit Union can help you stay on track by categorizing your spending, allowing you to easily monitor your progress. The apps also let you make payments on the go to avoid late charges and additional interest.

Try Tech Tools

To ensure you’re not chipping away at debt indefinitely, you’ll need to set a deadline. That’s where tech tools like NerdWallet’s debt payoff calculator can really make a difference by creating a plan for the date you wish to be debt-free, or illustrating how long it will take to pay off debt based on what you can pay each month. Some other helpful free debt-reduction tools include, ReadyForZero, and Debt Eliminator.

Attack Expensive Debt First

If you’re struggling with many different debts such as credit cards and various installment loans, it can be hard to know which one to pay first. One effective strategy is to focus your efforts on the balance that has the highest interest rate. This significantly cuts the total amount of interest coming out of your pocket. Pay as much as possible toward your highest-interest balance while still making timely smaller payments toward all other debts. Once that balance is gone, continue with this method until you’re debt-free. 

Don’t Make Things Worse

While in the process of managing and eliminating debt, it’s wise to put credit cards away to prevent balances from increasing. If you don’t have the cash to pay for something, just walk away, unless it’s an emergency. 

Consider Debt Consolidation

If debt from multiple sources gets out of hand, one option is debt consolidation, a type of refinancing that streamlines all those balances into one bill. This approach works best when it can reduce interest and monthly expenses, making it easier to pay off obligations. Several debt-consolidation options are available, including home equity financing, personal loans and balance transfer credit cards.

Keep in mind that just as it took time to accumulate debt, it takes time to pay it off. Be kind to yourself, perhaps treating yourself to a small reward each time you hit a milestone on the way toward your goal. Eventually you can earn the best reward of all: the peace of mind of knowing your debts are far behind you.

Roberta Pescow, NerdWallet

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