Cut out non-essential spending
For Berman, addressing her credit card debt began with an honest look at where her money was really going. She quickly noticed a pattern: frequent splurges on non-essentials.
The first step to creating a realistic budget is examining your lifestyle. Start by figuring out how much income you bring in each month and then break down what you spend. Don’t forget to factor in housing costs such as utilities, rent, and internet, among other things.
“If you’re anything like me, the source of your credit card debt is shopping,” she admitted, explaining that curbing these habits was her first step towards paying down her debt.
But Berman also recognized that overspending isn’t exclusive to shopping. “For some people, it’s just living beyond their means financially,” she noted, referring to the everyday extras that can quietly snowball — whether that’s an overpriced coffee here or a meal delivery there.
By cutting back on these non-essentials, she created room to make more payments on her balance and slowly chipped away at her debt.
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Read MoreBuild passive income streams
Another strategy that helped Berman tackle her debt was building a passive income stream.
Working in the creative industry, she leveraged freelancing opportunities and earned extra cash from the TikTok Creator Fund. But she’s quick to point out that this approach isn’t limited to creatives.
“Try and find extra money,” she advised. “Do any odd job you can, it will really help.”
Passive income streams can be a tool anyone can use to bring in some extra money on the side. Options like dividend-paying stocks or investing in fractional shares of income-generating properties can allow you to put your money to work for you.
Even small investments, such as automated savings platforms that round up your spare change, can generate additional income in the background — giving you more flexibility to pay down debt.
Consolidate debt to lower interest
The next tip Breman suggested is a debt consolidation loan to roll multiple balances into a single loan with a lower interest rate.
Breman recommended targeting an interest rate below 12% to keep monthly payment manageable.
With the average credit card APRs reaching 21.76% in Q3 2024 according to LendingTree, many may find it challenging to even make a dent in the principal.
By consolidating into a personal loan — where the average rate is 12.41% as of October 2024 — borrowers can ensure more of their payment goes towards reducing the actual debt, not just covering interest charges.
“You want to get your interest rate as low as humanly possible because it is physically impossible to pay down debt when you’re paying 26% interest each month,” Berman explained.
She also took a 401(k) loan, which allows you to borrow from your own retirement savings, to make her payments more manageable.
Though she emphasizes the importance of careful research before using retirement funds this way.
Kiss your credit card debt goodbye
Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.
Explore better ratesAutomated monthly payments
Automating your monthly payments can be another tool to help you keep your debt repayment on track.
Berman highlighted two popular ways for paying down debt: the snowball and avalanche methods.
With the snowball method, you start by paying off your smallest debt first. Once that’s cleared, you apply those payments towards the next smallest balance, gaining momentum as each debt gets eliminated.
However, Breman said that, while the method has its perks, it works better if you have 0% interest.
Berman prefers the avalanche method, which focuses on paying down the debt with the highest interest rate first.
By tackling the most costly debt upfront, you reduce overall interest payments, making it an efficient option for carrying high-interest balances.
Start tracking your finances
The final tip Berman shared is to start keeping track of where every dollar goes.
One way to do this is by exploring budgeting apps that categorize your spending and help identify where to cut back.
If you’re looking for more tailored guidance, consider speaking with a financial professional who can help you create a custom plan to help you keep track of your spending habits and pay off your debt faster.
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