Five ways to crush your debt for good; it’s not as difficult as you think!

BY CLEVE DeSOUZA

Getting out of debt may seem like an overwhelming goal, but it’s not only possible, it might not be as difficult as you think.

Here are five easy steps to take to escape debt.

Stop using your credit cards
If you don’t go in deeper, you can climb out faster. The best tool to control your spending is to establish a budget. A simple formula that works for most people is to budget about 50% of your after-tax income for necessities. That’s things such as housing, groceries, and medicine. Dedicate about 40% of for the things you want, such as subscribing to streaming services or eating out. The remaining 20% goes into savings.

Call your creditors and ask for a lower interest rate
There’s a customer service number on your billing statement. Before you call, do some homework.

Check your credit score. The higher your score, the more likely it is you’ll repay what you owe. The credit card company may be more willing to consider lowering your rate if they know you will pay what you owe.

Find out what interest rates and terms other companies are offering. Creditors need to stay competitive.

Offer to make a substantial payment to lower your outstanding balance in exchange for the lower rate. Check your budget to see if you can free up money to do this. Have you been saving for a new car? Use that money now to lower your balance. The new cars will still be there when you’re out of debt.

If you still get a no, ask what you can do to improve your chances of getting a yes later. Then, follow through and do what they suggest.

Remember not all debt is equal
One common method of paying off debt is to tackle the one with the lowest balance first. On the surface, it makes sense. You see quicker results. But a wiser method is to pay off the debt that carries the highest interest rate.

Here’s a comparison. Say you owe $5,000 on a Visa card with a 12% interest rate. If you make the minimum payment of $150, you’ll pay off the balance in 154 months. The interest adds up to $2,361. You also owe $10,000 on a MasterCard, which charges 24% interest. By making the monthly minimum payment of $300, the balance will be paid off in 353 months and will cost $19,333 in interest.

If you tackle the Visa’s $5,000 balance first by increasing your monthly payments to $350, you’ll pay it off in 66 months with $813 in interest. The extra payment saves you $1,548 in interest.

Target the card with the higher interest rate first, though, and watch what happens. By increasing your monthly payment to $500 on the MasterCard, you’ll pay off the debt in 140 months. In that time, you will pay $6,554 in interest – a savings of $12,779.

Eliminating the card with the highest interest pays off.

Shop around for the best insurance rates
It’s time consuming to call multiple agencies to get rates on car and homeowner’s insurance, but it could save you hundreds of dollars. NerdWallet estimates that shopping around for car insurance could save consumers an average of $859 a year.

Many of us can save money on insurance without switching agents. The rules vary from province to province, but many insurers offer discounts for safety upgrades such as installing a car alarm system or snow tires. Call your agent today.

Ask for a raise
Only about 30% of people ask for a pay hike, according to a study by PayScale.com. However, the rewards for those who take the risk are substantial. The PayScale.com study shows asking for a raise pays off about 80% of the time.

Take it step-by-step. Learn the rules of the debt game and play yourself to financial freedom.