Debt consolidation loans might sound like an easy way to get out of debt. But there’s no need to pay someone to lower your debt, when you’ve got all the tools you need to do it on your own, starting now. (Plus, let’s be honest. The money they’d charge you to consolidate debt could go to alot more useful things–like paying if off).
Here are four no “bs” ways to kick start your own debt consolidation. Whether you make a goal to tackle one of these a day, a week or a month, I guarantee you will emerge at least one step closer to being debt-free.
1. Laser focus your effort on reducing your most expensive debt first. Your most expensive debt is the loan that has the highest interest rate, not the one with the highest total amount owed.
I repeat: The highest interest loan you have is the one you focus on as your top priority to get out of debt. Have an extra $20 because a friend paid you back? Got an extra $50 for watching your neighbor’s cat? Put it toward the debt that costs you the most.
This example is admittedly not a perfect mathematical calculation, but it’s an idea we can all grasp quickly, so humor me: If you’re paying your credit card a 15% interest rate to carry a balance and you pay an extra $70 this month to it, you just got a 15% return back on that money.
Put in meaningful terms: If you’re willing to charge items on your credit card to earn a measly 1% in rewards or apply for a store credit card to save 10% on a $50 purchase, why would you forego a chance to get 15% back on your money?
2. Investigate how you might reduce your debt. If you carry higher interest credit card debt but have a good credit history overall, you may be able to pay off debt sooner by transferring a higher interest credit card balances to a low or no interest credit cards.
You might also be able to score a lower interest rate by calling the credit card company and requesting a lower rate, especially if you’ve been a customer in good standing for several years. You may qualify for a low interest loan through a peer to peer marketplace lender like Lending Club, or Prosper that gives you cash you can leverage to pay off the debt that costs you more. If you’re drowning in student loan debt, you may be able to secure a better interest rate through an alternative lender like SoFi. Or you may qualify for a repayment plan that’s offered through the Federal government, for some student loans.
3. Find some way to make more money. There are two ways to make more money: Spend less to free up cash you can use to pay off debt, or make more money. In a perfect world, you’ll do both.
Let’s get the excuses out of the way first: I’t’s not easy to make more money when you’re stuck in a fixed salary job or when you work full-time, or when you’re divorced or you have kids who cost you money in order to even leave the house and work to make money.
But rest assured, when there is a will to get out of debt, there is a way.
Cruise right past your mental excuses and give yourself the financial freedom you deserve–even if that means taking it on the chin for a hot minute if need be. Personally, I walked dogs on my lunch break from my full time job for two years for $10 a bucks a pop to get out of $15,000 in debt when I was in my twenties. I love animals and I love exercise, but let’s be real. I didn’t do it for the love of either. I just wanted to get out of debt that badly! (I was also going to grad school and training for a marathon at the time. I was busy, but I made the time because getting out of debt and feeling financially stuck was something I so desperately wanted).
On days that I was ready to lose it and accept that it was my destiny to be poor, I kept myself focused on the goal at hand. The second I paid off that last credit card bill with all the extra money I generated, I stopped dog walking. But those two dog walking years remain one of the smartest things I ever did.
There are tons of ways to make money online now and if you find a gig that works for your life and pays you well enough, go for it. But with the online marketplace being so flooded with people calling themselves freelancers and consultants, I’ve personally found that most of the “virtual gig” sites pay so poorly you’re better off to find a side gig the old fashioned way.
Do not over complicate the issue. You don’t need to spend money on a website, you don’t need to take meetings with clients. You really don’t even need to do research. Figure out something that gives you complete control in the sense of when you do the work, where, for how much, and for how often. What could do with your time that will cost you little to nothing in effort and gas money? Go do it.
We all have skills someone is willing to pay for whether it’s watching a cat, cleaning an office space a couple of nights a week, or picking up someone’s dry cleaning. It’s not your passion and it’s not a long-term career. It’s a means to get out of debt!
4. Stop filling the wrong need. When you’re desperate to get out of debt, that’s what you need. You do not need a new shirt, no matter how little it costs. You may not need to take taxis or your car when you could walk or take the bus. You don’t need a new smartphone. You may not need to watch cable when you could stream that same show on your computer for free. Or maybe you do. What you need is for you to decide–but you have to make choices and concessions somewhere to get out of debt. If you continue to spend a strategy and discipline for how you separate needs and wants, the best debt consolidation plan–whether managed yourself, or with the help of a financial professional–won’t work.
Whatever path you choose, debt consolidation is nothing more than a basic barter and trade. As long as you’re disciplined enough to put the money you make or save–either by earning it, finding a lower interest loan or cutting expenses–and put it immediately to your debt, you will save money and make progress.
It’s not easy, but it’s really that simple. You do not need to be a financial guru (or hire someone who claims to be) in order to consolidate your debt.