If you have a large income or the ability to create an extra disposable salary, getting out of debt can seem easily in reach. But not everyone has the time or capacity to take on another job, or increase their income through other means. So, how can you pay off debt quickly when you’re not bringing in more money each month? Here’s the approach I took as I paid off $14,000 in just over a year.
Step 1. Assess Your Spending Habits
One of the first things I did when I made the decision to be debt-free was to gather up my bank statements and evaluate my spending habits. It’s hard to continue making excuses when the numbers are staring back at you in black and white, so this was a big moment for me.
If you have a budget, you can see identify your problem areas (e.g. those areas where you tend to overspend). If you don’t have a budget yet, now’s the time to make one. Then give it a good hard look. Are there certain purchases you make every month that you don’t take advantage of to the fullest? Name three actions you can take right now to save money each month.
Step 2. Set a Debt-Free Date
The next step is to know the exact date you will become debt-free, as well as the amount of payments you need to make each month. I did this by signing up for ReadyForZero’s free debt plan, which not only helped me visualize my progress with their debt-tracking charts, but allowed me to sign up for bill reminders and make payments directly through their site.
You don’t need to use that site, but you should use a debt calculator to make it easy for you to stay on track. Choosing a debt payment method is key to the success of your debt journey, so find a strategy that works for you. The less effort you have to put in, the easier it will be for you to reach your goal.
Step 3. Make Hard Sacrifices Easier
While it is possible to pay off debt without making more money, it’s not without challenges. I came to a point where I no longer needed extras like a gym membership or cable TV, because I reminded myself that the necessary sacrifices it would take me to reach my goal were only temporary. I reminded myself that it’s not as if I had to do without for my entire life, just until I got my debts paid off and regained financial control.
The fact is: The more you sacrifice now, the faster you’ll be able to reach your goal and enjoy life to the fullest. For every extra $5 or $10 you pay towards your debts, you are that much closer to freedom.
There are other simple tactics I used to speed things up too:
- I made smaller payments more often.
- I signed up for bi-weekly (versus monthly) payments, which results in extra payments.
- I refinanced my car loan to a lower interest rate so I the balance was lower.
- I took advantage of automatic billing and online payments so I wouldn’t be tempted to pay less one month.
Step 4. Celebrate Big and Small Wins
Once you’ve created a plan, stick to it. The reason I was able to finally pay off all my consumer debt and be debt-free for the first time in my life is because I celebrated each milestone I hit — whether it was big or small.
I celebrated my small wins with small indulgences, like taking a bubble bath and watching my favorite TV show (through Netflix or Hulu mind you, since I canceled my cable bill). The point is to find a way to pat yourself on the back for your hard work, so you can keep the momentum going until you reach your goal of debt freedom. Then you can really celebrate.