Budgeting

How To Make Extra Money To Pay Off Debt

Credit card debt, when it gets bad enough, can become suffocating. Debt can pile on more and more even when you aren’t borrowing more money, especially if it is high-interest debt. If you don’t pay it off, the balances will just continue to grow and grow with new interest charges every month. 

If you want to have a healthy financial life and a good credit score, it is absolutely crucial that you know how to identify when you have too much debt and how to pay it down as quickly as possible, so it doesn’t take over your life. Because once it gets to a certain point, it can be incredibly difficult to escape without filing for bankruptcy. 

How To Tell When You Have Too Much Debt

If you are unsure whether you have hit the point where you have more debt than you should, we can outline some red flags that you should be looking out for. Whenever your debt payments begin putting a strain on your monthly budget is typically a clear indication that your debt is getting out of control. These are a few other indicators that you’ve bitten off more than you can chew:

  • You can only afford to make the minimum monthly payment on your credit card bill.
  • The minimum payments you are making are taking up too significant a portion of your budget, and it is difficult to afford your other bills. 
  • You are hitting the credit limit on a majority of your credit card accounts. 
  • Your minimum payments are getting higher and higher as time goes on instead of staying consistent.
  • The interest rates on your credit cards are so high that the charges that get added to your balance every month practically make your minimum payments useless.
  • Your debt-to-income ratio is far too high.
  • Your credit utilization ratio is also high and far above the 30% recommended by experts in personal finance.

If one or more of these indicators is familiar to you, it is likely time to seriously consider paying off your multiple debts completely and starting fresh. Having nearly all of these red flags could mean that it is important for you to pay down that debt as quickly and aggressively as possible. It might even benefit you to bring in extra money to take care of your debt faster.

Why Should You Pay Off Debt Quickly?

High-interest debt ought to be repaid aggressively if you wish to save on the exorbitant interest charges you could be subject to during your journey to financial freedom. The faster you pay off your credit card debt and other high-interest debt like cash advances available online and loans for people with bad credit, the more money you will be able to save on interest. If you have a considerable amount of debt, you might be seeing a negative effect on your credit report. This could be harming your financial opportunities. Reducing your debt will likely improve your credit utilization on your credit report, which will probably make a significant difference to your credit score.

Another reason why paying off debt quickly is a wise decision is the momentum it gives you. The human brain thrives on rewards to motivate them to complete hard work. Quick debt repayment will allow you to take advantage of the increase of motivation you experience each time you pay off another balance. Using the momentum to push yourself through to the finish line will allow you to save money and reach your goals faster, leaving you extra time to pursue other, more exciting financial goals. 

How To Aggressively Pay Down Credit Card Debt

Now that you know why you should pay off your debt faster, let’s take a look at strategies you can employ to make that possible. Being successful in aggressively paying off your credit card debt all comes down to your attitude and whether you are able to stay motivated through out. It is important to approach it with serious motivation and a willingness to sacrifice temporarily to make financial goals a reality.  

Here are a couple of essential tips for being successful in paying down debt:

Re-Organize Your Budget

Cut down on your expenses to the point where your budget is nearly all needs-based. Continue to save money for an emergency fund if you don’t have one so you have proper financial protection. Don’t spend money on unnecessary expenses that you can do without outside the basic necessities. 

Redirect all that cash that you usually spend on streaming services, online shopping, eating out, or ordering delivery towards extra payments on your debt. While this is not an enjoyable part of paying off debt for anyone, it is important to keep in mind that these are just temporary measures. You can handle going without for a few months to make a bigger dent in your debt at the beginning of your debt repayment journey. 

Pick a Repayment Strategy

One of the best ways to maintain your efforts even when it gets challenging is to rely on a debt repayment method. Picking a method that motivates and organizes you could give you direction when you aren’t exactly sure where to start. The two most common debt repayment strategies are the debt snowball method and the debt avalanche method. 

With these strategies, you pay the minimum payment on all your credit cards while putting most of your money toward one balance. The sole difference between the methods is which balance you start with. With the debt snowball, you start with the smallest balance. With the debt avalanche, you start with the balance that has the highest interest rate.

Make Extra Cash

If you want to tackle your debt much faster, increasing the amount of income you bring in each month will likely make the biggest difference. Asking for a raise or taking on a side hustle could help you pay hundreds or even thousands of dollars more on your debt every month. We will break down a few ways in which you can make extra cash to pay off your debt more quickly.

Seven Ways To Make More Money To Pay Off Debt

Here are some of the best ways to bring in more money aside from the income you make in your day job to pay off your debt significantly faster:

Debt Consolidation

Getting a debt consolidation loan could make paying off debt simpler with one monthly payment. Depending on how high your credit card rates are, obtaining a personal loan to consolidate all of your debts could save you a fair amount on interest charges while you work towards being debt-free. If you qualify for a larger loan amount, you may be able to get more cash than you need to pay off your other debts, which you could set aside in an emergency fund so you stay on track with your repayment plan. 

Put Any Windfalls Toward Debt

If you are struck by any financial windfall, put that towards paying off your debt. This isn’t your typical side hustle gig since it’s related to your regular job but it is extra income that people don’t often think to put towards debt. Let’s say you’ve just been awarded a major bonus at work or maybe you’ve received a huge tax refund. The first thing you may think to do with those extra funds is to treat yourself in some way with a large purchase or a mini vacation. However, if you wish to pay off your debt fast, it is imperative that you put every bit of extra money towards what you owe.

Ask For a Raise at Work

Instead of taking on two jobs or a side hustle, consider first asking your boss for a wage or salary increase. You might be due for a raise at your full-time job but just need to ask outright to make it happen. If you decide to do this, come to the meeting with your boss prepared with evidence of your hard work and the contribution you make to the company. Any amount of money over what you used to make every month can be put towards your credit cards until you are debt-free.

Walking Dogs and Pet Sitting

For the many animal lovers out there, it could be an absolute dream to earn money for walking dogs. It might not even feel like work, but it could still help you make extra payments to the credit card companies you have accounts with. There are apps that make it incredibly easy to find people in your neighborhood who may need a dog walker or a pet sitter. This work can make a perfect second job as it is very flexible but still brings in a decent income. 

Drive Delivery or Hailing Services

Another flexible side hustle where you can pick your own hours is driving for ride-hailing apps like Uber and Lyft. If you live in a busy city, driving as freelance work can be decently profitable. Ride-hailing apps will require you to have a valid driver’s license, a vehicle that fits the app’s rules, and a completed background check. In addition to driving passengers, you can also drive delivery for platforms like DoorDash, Postmates, GrubHub, Uber Eats, and Instacart.

Freelance Writing

There is an abundance of companies that rely on freelancers to produce content on their website. Being a freelance writer can be incredibly lucrative compared to other types of freelance work. As a freelance writer, you can work from home with flexible hours.

Selling Things Online

Outside of work hours for your full-time job, you could let your creativity takeover and sell items that you’ve crafted on Etsy. If you don’t have a creative bone in your body, you can sell nearly anything online if you use your imagination. Any old pieces of furniture, electronics you no longer use, lightly used clothes you don’t wear – many of these items can go for a decent price when you put them on eBay, Craiglist, or Facebook Marketplace. 

If you have an extensive closet that you often cycle through, use Depop or Poshmark to sell those clothes instead of donating them. You can put all the money you bring in from selling your stuff online towards extra payments on your debt, getting you to your personal finance goal so much faster.

References:
7 Side Hustles That Can Help You Pay Off Debt | Experian
Debt Snowflake Method – How to Use This Technique to Payoff Debt | Money Crashers