Top 7 Tips for Paying off Debt Quickly

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Our journey towards financial freedom was a long road. It changed the way we thought about the money we earned and the money we spent.

Suddenly, every dollar felt heavy. Every dollar had a purpose and meaning. There was no expense taken lightly and no purchase made without a careful consideration.

I’m not saying we don’t take liberties and have a little fun while we live on a budget. In fact, we travel a lot (not as much now that we are parents…) and learned how to travel with financial freedom!

But having a greater purpose to pay down our loans and pay off our debt changed our mindset on money drastically. We had a major paradigm shift and nothing in our world of finances stayed the same.

Change is always overwhelming at first. Budgeting is overwhelming; especially when you are getting started. But once we set our goal, the change happened quickly. In the end, the journey was, without a doubt, worth any trials we experienced along the way.

 

#1 Create a budget

Track your spending and determine what is a good amount for you in each category. Then stick to your budget. If you track your spending for a few months prior, it will surprise you how much you spend on things you don’t need. All spending is a choice. Choose the things you need and make a commitment to using your money to pay off your loans.

#2 Make a plan for paying off your debt

This probably will change as you progress, but having a concrete plan will help you to see your end goal. If you can see then end you are more likely to follow through on your plan. Set a long-term goal for yourself so that you can look back on your goal and remember what you are working towards. Make sure you goal is realistic so you don’t get discouraged, but also make it a challenge. I always had a little fun at the end of the month finding ways to stretch my dollar to stay on point.

#3 Pay off your highest interest rate loan first

This one can be tough to do. Almost everyone who has researched getting out of debt has heard of the “snowball method”.  Paying down the lowest balance loan and rolling the payments to the next one. We chose to pay off the loan with the highest interest rate first, as opposed to the smallest loan, because we knew the motivation factor of paying off the lowest loan first and fastest wouldn’t matter to us. If you are someone who needs to find motivation in seeing progress sooner, then pay off the lowest loan first. You will however, save more money by attacking the highest interest loan first.  Both ways work great, and have their pros and cons, but be strategic about what you choose.

#4 Think twice before large purchases

There are to many stories of people going in and buying a brand new 70″ TV, only to replace the 65″ they already have.  When you are thinking of making a large purchase, whether a new TV, couch, vehicle, or set of golf clubs, make sure you sleep on it for several nights and have concluded that this purchase is indeed necessary.  Often times you will find you can do without the purchase you are debating until your debts have been resolved.

#5 Find ways to bring in extra income

What worked for us is to use our extra time. I picked up tutoring after school (when I worked as a teacher) and worked a 2nd job during my summers off. Aaron picked up extra hours and earned an overtime pay in his job. We both worked hard to bring in extra income to help us pay off our debt. There are a ton of ways to earn a side income online.

#6 Keep yourself motivated

First set a long-term goal for yourself. Then set short-term, attainable goals for yourself each month. For example, staying within your monthly budget, working overtime, earning x amount of side income; these are all great goals. Second, seeing the overall number on your debt go down, specific loans getting paid off, and seeing your progress move are all fantastic motivators. Look at that often!

#7 Find ways to cut spending and tighten up your budget

Throughout our time, we slowly found ways to cut down on our budget even more. We began by tightening up our cash budget, category by category. Once we got that down to a point where we were pinching pennies but still able to live a little, we began looking for other cost saving tips within our budget. We ended up getting rid of cable all together and watched shows through Netflix. We found a cheaper gym.  Joining my parents phone plan under the family rate saved us tons. Basically, we went through each monthly bill and asked ourselves if it was necessary and if there was a way to cut costs. If you analyze your spending enough, you will find ways to cut down costs that works for you and your family.

These are the major things that worked for us, and I believe they can help you too. But it all starts with a step. If you’re looking at your debt and it seems like a mountain impossible to climb, if it seems like your Everest, remember that each journey begins with that first step – the decision to do it. So decide, commit, and get read to climb.

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