How to Pay Off Debt Faster (and Easier!) Than Ever
Want to move from good to better to best in your finances and actually pay off debt fast? You can do it! But you have to draw a line in the sand.
That means no more mindless spending, way less eating at fancy restaurants, and no more swiping credit cards. In order to take control of your budget and make the most of your income, you have to get serious about your good intentions.
Our hope is to pair your good intentions with our proven strategies to help you pay off debt quicker and easier than you ever thought possible. Below you’ll find step-by-step instructions for assessing and attacking your non-mortgage debts, tracking your progress, and staying encouraged along the way.
Decide Now to View Debt Differently
You probably think paying off debt is a numbers game. Oh no, my friends. Waving goodbye to credit cards, student loans and medical bills has nothing to do with numbers. Paying off debt is the ultimate mind game—a mind game we intend for you to win!
To most people, debt feels inevitable: Everyone has a car loan. You can’t get a degree without debt. Credit cards earn you money. These are things you probably hear about debt even though they aren’t true! You can pay cash for a car, graduate without student loans, and get by just fine without credit cards.
It’s unsettling to have debt hanging over your head, and it stinks to send your hard-earned money to someone else every month.
If you really want to pay off debt for good, you have to play a little trick on your brain.
Decide today that you don’t need your old debt, you won’t take on any new debt, and you have what it takes to pay off your existing debt. Tell yourself in the mirror. Write it down. Tell your family and friends. Then get after it. We’ll show you how.
Save $1,000 as a Buffer Against New Debt
Saving $1000—not paying off that high interest credit card—is your best first move. We call this goal a starter emergency fund. Do everything you can to quickly put $1,000 in the bank and make a commitment to leave the money there unless you absolutely need it.
Here’s why: when you’re paying off debt we want you to remain focused on paying off debt. And while you can’t keep life from happening, you can prepare for it. Cash on hand allows you to quickly fix the car or pay an unexpected medical bill without worries. With a starter emergency fund, you avoid taking on new debt while getting rid of your old debt.
Write Down How Much Debt You Need to Pay Off
Sounds simple enough, but for some people this is the scariest step of all. Maybe you’re afraid to face the truth about your money situation. But let us encourage you! We’ve all made money mistakes, and it’s never too late to change your course by developing better habits now.
It takes guts to put pen to paper and write down your debts. But it’s worth it! List in hand, you’re now ready to do something about those numbers. And we’ll be with you every step of the way!
Reevaluate Your Budget
Before we talk through the specifics of paying off debt, let’s consider your monthly budget. Don’t have one? No problem! Check out our guide for building a solid budget in just minutes. Once you’re squared away, ask yourself this question: When it comes to paying off debt do I have an income problem or a spending problem?
In other words, do you need to make more or spend less or both? Perhaps you can work some overtime, take on a second job, or start a small business on the side. Maybe you need to rein in your spending by eating out less, buying fewer clothes, or canceling your cable.
Prioritize Your Debt Payoff Plan
To pay off debt fast you’ll need a strong and easy-to-follow strategy. Here’s the plan in a nutshell:
Wherever appropriate, sell off debts. If it will take you more than two years to get rid of debt on tangible items like a car, boat or rental property or if more than 50% of your net worth is tied up because of debt, you may be better off selling the item now instead of working for years to pay it off.
Start the debt snowball: List your non-mortgage debts from smallest to largest and attack the smallest debt first. Forget interest rates. The debt snowball is where you’ll find the biggest payoff. When you start small and put every dollar you can toward the first debt on your list, you build momentum. It’s a proven method for kicking debt to the curb for good.¹
Pay the minimum payment on all other debts. While you attack the smallest debt, continue to make minimum payments on all other debts. As soon as you knock out the first debt, add that money to your second debt’s minimum payment and keep that debt snowball rolling!
Give yourself a deadline. Review your budget and set a reasonable goal. Maybe it’s possible to be debt-free in one year. Circle the date on your calendar and let this timeline inspire you to work harder.
How to Pay Off Your Debt Using EveryDollar
We’ve made it easy for you to build your debt payoff plan right into your EveryDollar budget.
Find the established debt category and add all of your debts, including the current balances and the minimum payment for each.
You can then track your progress each month by recording your debt payments as a transaction in EveryDollar. We’ll update your balance as you watch it get closer and closer to zero!
EveryDollar Plus users can also sort the balances from smallest to largest automatically and see a yellow line indicating the smallest balance—the one you’re laser-focused on. Not an EveryDollar Plus user? Upgrade your account today to enjoy these and other bonus features!
Stay Motivated by Celebrating Every Win
As you work through these steps for paying off your debt quickly and easily, be sure to pause every now and then for a little money-related merrymaking. Stash $1,000 in the bank? Enjoy a celebratory meal out with your spouse. Pay off your first debt using the debt snowball? Host movie night with the kids and eat pizza in the living room. Keep the good feelings flowing and the debt reduction going!
If you get discouraged or feel overwhelmed, remember this—you’re not alone. This plan has helped almost 5 million individuals take control of their finances. Listen to their stories for the encouragement you need to keep moving forward.