Here are 10 ways to get out debt quickly:
- Live on a budget. This is so important. Know how much money is coming in and out each month. I use Excel to track my spending and Mint.com to see trends in net worth over the long term.
- Find places in your budget to cut costs and divert that money to your debt. Reduce your phone & entertainment bill. Go down to one car to reduce insurance, gas and car payments etc. Our biggest cost saver was not eating out and having one car.
- Earn some extra money. Work overtime or have a side gig. I would tutor some weekends and we would put my husband’s bonus towards the debt as well.
- Use cash or gift cards when shopping. During our debt repayment, we lived on the envelope system. All bills were paid online and expenses that varied like groceries and gas we paid with cash. Once all the cash was gone, that’s when our spending stopped. This took about 6-8 months to get used to, so don’t feel discouraged. For those that prefer to use plastic, load up gift cards and use those instead.
- Find fun staycation activities: Vacations, even modestly priced ones can reduce the amount you can put towards your debt. Instead, find fun cheaply priced events that are happening within your city and go to those instead.
- Have at least $5,000 of emergency savings. Let’s face it, just because you decide to get out of debt, doesn’t mean life won’t stop happening to you. No matter how hard you try. You may have an expensive car repair or dental work etc. Having $0 savings while paying off debt can be difficult. Especially if the debt is large and the time will take longer than 1 year. The motivation that you will get when you start seeing your debt go down substantially will be quickly lost if you have to go back into debt to take care of unexpected expenses. Minimize this my having savings. I had $10,000 in savings and depleted it over the almost 2.5 years for big ticket expenses.
- Put all windfall income towards the debt. Everything from overtime income, side hustle jobs like tutoring and tax refunds went towards our debt.
- Keep your grocery bill low & minimize eating out. This was discussed in my previous post “How I paid off a six figure student loan debt in 2.5 years”
- Give yourself a timeline. Once you prepare your budget, you will have an idea of how much money is left over for debt repayment. Use this number to compare with the size of your debt and give yourself a reasonable but fairly aggressive timeline to get rid of the debt. My original timeline for the debt was 3 years, but as windfall income was added onto our budget (i.e. tax refund, overtime etc.) this allowed us to finish 6 months earlier at 2.5 years. Setting a time frame gives you the drive and the focus you need to meet and exceed your goals.
- Be prepared for the final 1-3 months of your debt repayment. For some reason, when you are in the final stretch of your debt repayment, you may have the desire to divert your money elsewhere. Either for discretionary spending or buying something you really want. Continue to stick to the budget, your almost there!
Tags: a lot of debt, budget, Debt, debt journey, debt repayment, earn extra money, emergency savings, financial mess, getting out of debt, gitft cards, goals, mint.com, money, staycation, student debt, timeline