How to Pay Off Debt Faster Than Ever
Almost three out of four Americans say they’re burdened with debt.1 Whether or not you’re part of the majority here, it’s clear debt is quite common. But it doesn’t have to be this way. Besides, who wants to be common? Who wants to feel burdened?
That’s what debt does. It holds you back from excellence, from achieving your dreams, and from feeling peace.
But again: It doesn’t have to be this way. (Yes, we said it twice so it hits home.)
Not only do you not have to feel burdened by your bills, you also don’t have to spend your life owing money. You can pay off your debt. You can be the one in control of your money—not the lenders you’re borrowing from at a price that’s holding you back.
With these six tips, you can get rid of debt faster than ever. So here we go.
1. Start viewing debt differently.
You may think paying off debt is a numbers game. That makes sense at first: Debt is about money, and money is about numbers. But what you’re really dealing with here is the ultimate mind game—one we completely believe you can win. But first, you have to rethink your debt situation.
To most people, debt feels inevitable. Everyone has a car loan. You can’t get a degree without debt. Credit cards are necessary to manage money. You’ve most likely heard these things. Maybe you’ve said these things. But these things are not true!
The truth is this: You can pay cash for a car, graduate with zero student loans, and get by in life just fine (splendidly, in fact) without credit cards.
If you really want to pay off debt for good (and you do!), it’s time to start viewing debt differently. Decide today that you won’t take on any new debt and that you have what it takes to pay off your old debt.
2. Make a budget.
But where will you find the money to pay off all that debt? It’s time to get real with your money. It’s time to budget.
If you don’t have a budget, now’s the perfect moment to start one. If you already budget regularly, that’s awesome! In either case, keep reading. We’ve got more to share.
Budgets can seem intimidating to new budgeters. And even the pros sometimes have trouble keeping track of every dollar they spend, which is a necessity for a debt-free life. With our EveryDollar budgeting tool, you can budget from your desktop and your phone with our mobile app.
And with our upgraded EveryDollar Plus version, you get access to even more. “Like what?” you ask. Like our transaction streaming service and a Financial Peace Membership, which includes our Emergency Fund Planner and Debt Snowball Tool. (We’ll go over both in more detail in a minute.)
3. Save a $1,000 safety net against debt.
You’re determined to leave debt behind for good. You’ve got a budget. Woo-hoo! The next step is vital. You need to save up $1,000. We call this a starter emergency fund—or Baby Step 1 of our 7-step plan for your ultimate financial wellness.
What this money does isn’t magic. It’s logic. But it’s bound to feel magical. When you have this safety net for life’s curveballs (because you know they’ll come), it means you don't have to turn back to debt. You have cash ready to go. That’s the logic.
The magic is the feeling you get when you pay cash. You have the money you need for emergencies. You don’t have to rely on someone else or something else to cover them.
This is where the EveryDollar Plus access to your very own Emergency Fund Planner comes in handy. We’ve got plenty of ideas on how to get that $1,000 quickly—and an interactive, plump piggy bank for you to log your savings progress.
Having $1,000 in your savings account will probably make you feel like dancing. So do it. Dance. Then get back to these tips.
4. Write down all your debt.
Some people want to ignore this step more than anything. But listen: Ignoring your debt doesn’t make it go away.
Don’t feel bad if this step scares you. But don’t let that fear keep you from moving forward. It’s time to look every last dollar of debt in the eye and get real with it.
You do that by writing down every single debt you have. Name the debt. Write down the total owed. Write down the minimum monthly payment. Then move to tip five.
5. Create a debt payoff plan.
You’ve identified all your debt, so it’s time to plan your attack.
First, get back into your budget. Tighten your spending, cut extras, and free up money so you can get debt out of your life forever.
Second, it’s time to use another awesome EveryDollar Plus feature in your Financial Peace Membership—the Debt Snowball Tool. This awesome, interactive tool helps you pay off each debt in order from smallest to largest.
Forget about the size of those interest rates for right now. Mathematically, you may think you should go for the highest interest rates first. But this isn’t about mathematical formulas. This is about motivation.
The debt snowball is successful because it builds on small wins. When you pay off the smallest debt first, you see progress right away and stay motivated until you've paid off every single debt.
Be intense about tracking and tightening your spending. Be like an ostrich. Some underestimate this awkward, flightless bird, but its kick has power and strength enough to take down the king of the jungle himself. Never stop kicking until that debt lion is out of your life forever, ostrich friends.
6. Celebrate every win along the way.
Like we said, beating debt is a mind game—and, to be honest, a heart game too. You need your brain and your heart on board. And along the path, you need to praise both with a little hoopla.
Now, “hoopla” doesn’t mean you book a luxury bungalow on a private island to reward yourself for paying off that $150 personal loan to your Uncle Scott. But your favorite scented candle, a fancy coffee drink (don’t hold the foam, barista—double it!), or a pizza night with the family—those are great ways to celebrate any win within Baby Step 2. It’s a reminder to yourself (and everyone who’s in the debt payoff game with you) that the lion won’t win. You will, you beautiful ostrich.
EveryDollar wants to be there for all the steps. And we’re ready with this budgeting tool that goes beyond tracking your spending and into tracking your debt-payoff progress. You can even try our Plus version free for a 14-day trial.
What do you have to lose? Just debt. Sounds perfect to us.
Try EveryDollar Plus free today.