Pay Off Your Debt Faster
The Covid-19 pandemic has plunged many into unexpected debt and caused great concern in the process. When dealing with debt, it’s important not to allow it to run away with you and instead face it head on, and that way, you can pay off your debt faster than you think.
Jürg Widmer is here to help provide personal finance advice from someone who’s held almost every financial position in the business and provide you with the best debt payoff tips.
Money Not Spent or Cream Off the Top
If you receive any unexpected money in your pocket and you’re in debt, the last place it needs to be is in your pocket!
When you have debt, and you want to pay off your debt faster, the one thing you need to do is keep chipping away at it because doing so will not only reduce your interest but also ensure you pay off more than your minimum payments.
Whenever you pay less than you expect to for something, the extra that you save is the amount you need to pay off your debt. For example, if you have a budget of £100 per week for grocery shopping, it comes to £82. As long as you have everything on your shopping list, use the remaining £18 to pay off one of your debts. Either the one with the largest amount to pay down or the one with the highest interest rate.
Perhaps you end up with a tax rebate, or a friend owed you some money you had forgotten about. Maybe your friend picks up the tab at dinner, or your boss paid for the drinks when you weren’t expecting that. These are all unexpected amounts of money that you can use to pay off your debt. It doesn’t matter if it’s as small as £1; everything will help pay your debt faster.
This doesn’t just work if you’re in debt. It works if you’re trying to save your money too. Everything surplus to requirements, pay down your debt or save money for something you need or a rainy day.
Everything adds up when you spend too much, and everything adds up when you spend too little. The latter just leaves you in a better position.
Banking apps now allow you to set up additional areas to ‘round-up’ your card spending to the nearest pound, and you can then have the change put into another section outside of the primary account. This could be called ‘Pay Off Debt’ or ‘Saving for [insert name]’.
Surprise Money You Didn’t Expect
When you are aware of it, you realise that everyone gets money they didn’t expect from all sorts of places. It could be a pay rise, a bonus from work or you got given money from a relative for your Birthday, holiday or just because they care. When that money comes in, don’t even think about what you could be spending it on. Allocate it for paying off your debt or putting in your savings account right away.
If you want to purchase a house, you need to be relatively debt-free and also have a deposit. Work first on paying off the debt and then saving for the deposit using the tips here.
Whether you want to pay off debt faster or save better, these two tips will help you without a doubt.