The most effective way to pay off debt is with self discipline and will power. Many people think it takes a sizable income as well, but I do not think it does. I work at a non-profit and make a non-profits salary. My husband also makes a modest income working at a bank. You would classify us as average income earners.
It does not matter whether you make $100k or $35k a year. Rather it is about wanting to rid yourself of debt obligations and having the motivation to do so. After realizing that it would take us 11 years and $1,300/month in payments to pay off our student loans, that was enough for us.
Whether you have a large student loan or not, here is what I learned from my experience as key to paying off debt in a short period of time.
- Prepare a budget and stick to it. This is crucial, you need a lean budget. In your budget, you should be allocating at least 20% of your income towards debt repayment if you want to see sizable progress.
- Live modestly and rent. If you have the opportunity to move back with your parents…do it. Unfortunately, my husband and I did not have that opportunity so we rented a 1 bedroom on the ground floor for about $1,250/month. We live in a big city so these rates are not uncommon.
- Pay CASH for your car. One of the biggest cost savings was the 2003 Mazda Protégé that my husband and I bought at a car auction in 2014 for $2,500. This 11-year-old car has been very reliable. Outside of regular maintenance and gas, we have no problems with this vehicle. But most importantly, NO CAR PAYMENTS, so the extra money went towards our debt.
- Car pool if you can and/or take public transit. We tried the first year of our debt repayment to use public transit only, but Calgary Alberta has a large land mass and dispersed communities. Instead, we bought one car and car pooled to and from work when we can. The days that our work schedules do not align, I take the transit. Depending on your family situation you may not be able to car pool but try to save on transportation costs by buying used, reliable vehicles and paying cash.
For those of you trying to get rid of student loan debt, or have finished paying off your debts, what did or did not work for you?
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