How To Pay Off Debt Fast
There are few things that are worse than that feeling you get when you know you’re drowning in debt. Believe me, I know. I’ve been there! Today I want to show you how to pay off debt…and pay off debt fast!
Most people get into debt because they are living paycheck to paycheck and don’t have an emergency fund. They make the minimum payments each month and spend everything else on things that they want. The end result is a pile of debt that will take years to pay off, if ever! This blog post contains six proven strategies for paying off your debts fast so you can live without the stress of owing money!
If your finances are a hot mess, it can be incredibly overwhelming to think about becoming debt-free. I’ll be honest with you. Learning how to pay off debt fast isn’t for the faint of heart. If you’re looking for some “get rich quick, pay off debt quick” scheme, you’ve come to the wrong place. Becoming debt free will take some hard work and some sacrifices on your part.
How To Pay Off Debt Fast
Know what you owe.
If you’re ready to get serious about debt, you need to pull your head out of the sand and figure out exactly how much you owe. There is power in knowing that big scary number. If you’re unsure how much debt you have, you will never be able to confidently say you’ve paid it all off. Make a list of all of your debts.
When my husband and I first faced our debt, we had over $80,000 of debt. It was a ridiculous number, but with hard work and attention to detail, we were able to get it paid off.
One of the things that is helpful in knowing what you owe is to get a free copy of your credit report from annualcreditreport.com. If you’re wanting to know that all of your debt is going to be paid, you will want to request a credit report from all three before you start working to pay off debt. Once a year, you can request your credit report from all three agencies.
Set a debt-free goal date
A goal without a plan is just a wish. Focusing your efforts on debt repayment without setting a goal date may work for some people, but it will likely not be enough to help you get out of debt.
Before you begin, look at how much debt you have total. If you owe $10,000, set a goal of paying off $1,000 first. Of course you will want to pay the entire $10,000 off as quickly as possible, because interest rates are terrible! That high of a goal can get overwhelming quickly.
Breaking your goals down into more manageable steps will help you create the “snowball” effect that is so popular when paying off debt. If $1,000 is still too much to reach for at once, start with $100. No amount is too small! The only person you’re competing with is yourself.
Setting a debt-free goal date includes basic budgeting. How much can you truly afford to put towards your debts each week? Giving yourself a deadline creates a sense of urgency, use that as motivation to stay on track! Remember to make your goal challenging, but realistic, so it won’t cause too much financial stress in the process!
After you set your mini goal, set a goal date. If your goal is $100 and you know you have an extra $50 a week you can save, set your goal date about 2 weeks out. You want to be ambitious without being unrealistic. Without deadlines, there’s way too much room for slacking.
Reduce all possible expenses
To prepare you for your journey to becoming debt-free, begin reducing as many of your expenses as possible. This is especially important if you don’t have a bunch of extra income to put towards your debt each month. This is where sacrifices and strict budgeting come into play.
Make your morning coffee at home, try to eliminate money spent on fast food (or at least reduce how often you go out for fast food), and call to see if your bills for things like the internet, cable, car insurance, etc. can be lowered.
This phase – especially cutting out extra shopping and fast food – may be difficult at first. The longer you stick with it, the easier it gets.
Reach out to creditors
It is not common knowledge that some creditors will actually negotiate the total amount of your debt with you, but they do it all the time. Use this secret to your advantage! These negotiations can often result in you owing much less than you started with.
The only way to see if a creditor is willing to negotiate is to contact them.
One thing to keep in mind when reaching out to creditors is that they will now have your phone number. You’ll most likely by inundated with collection calls!
Use the Debt Snowball Method
The Debt Snowball Method of repaying debt was popularized by financial guru Dave Ramsey and, even if you’re not a fan of his personally, this method is still one of the best ways to pay off debt. When we were up to our eyeballs in debt, we started our journey by reading The Total Money Makeover. This was a game-changer for us.
I love this process because it’s easy to understand and easy to gain momentum with. You begin paying off debt by paying down the smallest debt owed. You don’t need to worry about interest rates or anything else. Just take your smallest balance and pay it down aggressively while making sure to continue to make the minimum payments on your other debts.
Once it is fully paid, you then move onto the next smallest balance, making sure to roll the money you were paying monthly on your recently paid off balance into the monthly payment of your new goal. Over time, you will be paying off debts with high monthly payments and not suffering too much because of it, due to the rolling over of previous payments.
Make the most of every penny
When you’re trying to pay off debt fast, you can’t be stingy with the money you use to pay your total debt down. In other words, every penny of extra money you have should go toward your debt repayment campaign until you are totally debt-free. If this means that you can’t afford other things now, don’t worry: in a short time, your higher-priority goals will be achieved and all of those things that seemed so important before won’t seem like such luxuries anymore.
One sneaky, painless way to use every penny is to set your bank to round up all of your purchases to the next dollar. This means if you purchase groceries and the total was $103.45, you will have $.55 rounded up and put into another savings or checking account. Then, use the funds from that account to pay extra on your debts.
Don’t forget that you can always pick up a side hustle to help bring in extra cash. The extra effort may be worth it if you’re really trying to become debt-free as fast as you possibly can.
Track your progress
It may sound like common sense, but this is still worth mentioning. Keeping a debt payment tracker on hand can be a very big motivator for when you get burned out and tired of the work involved. It can really help you keep pushing when you feel like giving up to see how far you’ve come.
Your debt tracker can be as extensive or as simple as you want it to be. For some, planners with graphs and boards work well. For others, a simple blank thermometer on the wall is the best option. Whatever you choose, make sure you keep it in a place that you’ll see it often to keep that motivation rolling. Remember along the way that every payment you make is one step closer to being completely debt-free!
Remember this is a journey
Paying off debt can be tedious, time consuming and at times even heartbreaking. You will find yourself jealous of friends who are “living the life” because they’re not worried about their debt. You may even find yourself wanting to quit or simply angry at the fact that you’re in debt in the first place.
In the end, if you do find yourself feeling any of those negative emotions, remind yourself that it is one-hundred percent normal to feel this way on any hard journey. Then refocus…and move forward!
In the long run, you’ll be so glad that you pushed yourself in order to become debt-free. As Dave Ramsey says so often, “Live like no one else, so later you can live like no one else.” In other words, make the sacrifices and do without now so that later you can live a life of financial freedom and abundance.