Do you get frustrated each month when it’s time to pay bills? Or have you come to the point that you just ignore the bills because they’re too overwhelming to even think about it? If this is you, read on. If you’re tired of drowning in debt, it’s time for a change. It’s time to learn some steps to get you on your way to paying off debt. I’ll show you seven practical tips for paying off debt so you can be on your way to a happier you!
We’ve all been there. We see something we want, but maybe we don’t have the cash at the time. So we use the credit card. Or maybe you started out with that one tiny credit card and it’s now become twenty. The problem is twenty payments and debts are much more overwhelming than the one tiny card that started it all.
I remember when I came to college and it seemed there were tables set up all over promoting this card or that card. “Get this card and grab your free t-shirt.” “No interest for one year.” Or “you need a credit card to build your credit”. And “look how cool this card looks with your school logo on it?” (I’m looking at you MBNA). When I think back on it, it’s insane.
Who in their right mind would give a broke college student a credit card?
Plenty of people – that’s who. And it’s incredibly easy to fall into that trap.
The amount of debt the average American household carries is staggering as shown in this study from Nerd Wallet in 2018.
But don’t give up before you start. The important thing is to just start now.
Tips for Paying Off Debt
It’s not forever and you aren’t doomed.
You need a plan that works with any budget. And also some kick-ass motivation. Because it won’t be easy, but it’ll 100% be worth it. No matter where you are in your financial journey, you’ve got to start somewhere. Even if you’re at the bottom at the moment.
Get a binder and some paper or make yourself a spreadsheet. Whatever works best for you. I’m an old fashioned pen and paper type of person. If you’re not, get a spreadsheet that works for you.
Paying Off Debt is an Emotional Journey
It’s time to get your mind right. This is going to be a difficult journey for some people. It’s not an immediate result or fix to your problems. And it’s going to take work. There are lots of emotions that may surface when you sit down to do this and some may not be that pleasant.
That list encompasses a lot of feelings ranging from bad to good. And it’s ok, no matter where you fall on the emotional spectrum. You might be mad at yourself for getting into a mess. Or excited that you’re finally going to do something about it. It may sound silly, but get a piece of paper and write it out.
Make yourself a mission statement. Why are you doing this? What do you hope to accomplish? It doesn’t have to be elaborate or fancy. But keep it handy. Look back on it when you’re feeling like there’s no light at the end of the tunnel and remember the reason you’re doing this in the first place.
For some people, it’s to stop living paycheck to paycheck. Or for others, it’s to finally have an emergency fund. Maybe you want kids one day and you want to stay home with them if possible.
Or your reason can simply be freedom. Freedom from debt. Freedom from wondering how to even make the minimum monthly payments.
Get Your Family and/or Friends on Board with the Plan
This step may be simple if you’re single or if you have a partner with the same enthusiasm that you have.
But it isn’t always that way. Sometimes there’s a spender and a saver in the house. The spender wants to keep spending and the saver is left attempting to figure out how to get out of the mess.
Talk through it.
If you’re the saver trying to convince the spender, tell them how you feel being weighed down with the debt. Show them your goals and why you want to do this. Talk to your pastor if you have one, go to a financial-based counselor or any other method that might help to get everyone on the plan. It’ll be much easier without having to drag the other person kicking and screaming.
If you’ve done everything you can and your partner won’t budge, don’t give up. Maybe they need to see a little progress first. Keep trying. Show them the benefit of not living in debt shackles forever.
Talk to your kids about debt if they’re old enough.
We did this when my income went down drastically last year due to my company slashing hours. I had a steady 29 hours a week and got cut to 9 hours a week. My kids were 7 and 10 at the time. I sat them down and showed them exactly how much my paycheck was before the cut and what it was after. This made it easy for them to understand why we were severely limiting our spending.
It’s up to you how much you involve your kids – that’s a personal choice to make on your own. But, it made it much easier when mine understood the “why” of what we were doing instead of us just continuing to say no to things without an explanation. They knew why we couldn’t spend $50 on the movies that day or why we couldn’t go more places that summer.
And guess what happened with my kids? Did they break down and fall apart? Or was their summer ruined because we had significantly less money? Nope and nope. They were perfectly fine. If anything, I think it benefitted them greatly. They learned even more of a lesson about handling money appropriately. If we had been drowning in debt at that time, we would’ve been in a huge mess.
If you’re single, or if you’re spouse isn’t on board, you might need to find a close friend or family member to cheer you on your journey for paying off your debts.
You’ll likely have to turn down a few invites to eat out or meet for drinks. Find a few people that will support you instead of trying to drag you back down into debt. Those people will be helpful when you need a morale boost!
You aren’t trying to convince them to come along for your journey, but you need some people in your circle that understand why and what you’re doing.
Assess Your Debt
Get a pen and paper. And probably a glass of wine. This part sucks.
We did this years ago when we were trying to sell our previous house and get into one in a better school district. And it wasn’t pretty. And you’ll likely have mixed emotions. You’ll get angry at yourself for getting into a mess. Or you’ll cry because it seems hopeless.
But these are good feelings to have when you’re about to start attacking your debt. Get pissed off to the point that you’re unwilling to feel those crappy feelings any longer.
You don’t need anything fancy for this part. A simple sheet of paper or if you’re more into the spreadsheet type of thing – do that.
List them out. All of them. It might take a while if you been hiding under the covers for a bit. You’ll need to dust off that old mail or those ancient passwords or actually use the 1-800 numbers on the back of your cards. But however you have to do it, find out exactly how much and who you owe.
- List all the debts and their amounts from smallest to largest.
- Include everything that you owe someone else (other than a mortgage right now). Even loans from the family go on the list.
- Medical bills, credit cards, loans, car loans, student loans, an old cable bill in collections – list it all.
Now pat yourself on the back because this is the hardest step. It’s easier to hide from things sometimes instead of facing them. But you’ve done it.
Now that you know who you owe and what you owe, it’s time to make a plan to start knocking it out.
Stop Adding New Debt
You can’t possibly get out of a financial mess if you continue to add to the pile of debt. It’s like trying to put out a fire but continually adding lighter fluid to it. It’s not a match.
Will it suck? Possibly. It’ll be an adjustment if you’re a spender.
Will you have to say no to things? Absolutely.
But will it be worth it? 10000% yes.
If you’re serious about this, you’ve got to actually get serious. Do you want it or not? It’s like me and my getting fit journey. I haven’t been serious about it for the past few months and it’s showing. Around my hips. And I’m just about to that angry point when changes happen. Get to your angry point where you’re willing to sacrifice to make a change.
So say to yourself right now, it’ll stop. Any unnecessary expense is not happening. Explain it to your kids if you have them, tell a friend or two that can support you and not make you feel silly, and commit to yourself. Because you can do it.
I know it’s not fun to pass up a fun night out or a weekend away. Or maybe you aren’t even at that point. Maybe you’re already giving those things up because there’s not enough money to even buy groceries this week. Again – this isn’t one size fits all. We all have different situations, but no matter what your situation, this will work and it’ll benefit you greatly.
But you have to be willing to sacrifice.
You have to be willing to tell yourself right this second that you won’t put one more cent on credit. Period. End of story.
Take a break from all spending that isn’t absolutely necessary at the moment. It’s not forever. But you can’t get out of a hole if you keep digging yourself further and further in.
Make a Budget
Write out all your monthly expenses. Housing, gas, electric, water, preschool, medical, whatever it is that reoccurs every single month. If you have a bill that’s paid annually or quarterly, divide it appropriately, but make sure you include it.
Get a total number for every person/company you owe each month. Everything that is a must to live and also your debts. You need to know exactly how much money you have going out the door each month.
Include groceries, gas, and anything else that must be paid each month. If you have multiple debts, list out each of the minimum payments.
Now write your income. If your income is less than the total number that you owe each month, something has to give. Either your income has to go up or you start cutting.
Make A Plan for Paying Off Your Debts
Now that you know exactly where you stand, you can make a plan. What’s the quickest way that you can turn it around so your monthly debt does not exceed your income?
First, take a look at your monthly bills. What can go or decrease? Do you generally spend $400 eating out each month? Are you paying for premium cable that barely gets watched? Or have you shopped around for cheaper car insurance lately? Find something to trim or cut out completely. A gym membership you never use, crazy grocery bills because you don’t meal plan, or new clothes you don’t need. Here’s a more detailed look at easy ways to save money on a tight budget that might help.
Are you in debt with cars? Can you sell one and buy something cheaper for cash? If so, this will make a huge and immediate dent in the debt. It might not be what you want to do, but it will give you a huge boost in the right direction.
Maybe it’s none of these. Maybe you aren’t living lavishly and you still don’t have enough. Then your option is to increase the income. Take a second job, pick up extra shifts, babysit, pet sit, drive for Uber – whatever you can do to increase the monthly income.
There isn’t a one size fits all when attempting to increase your income, but there is something you can do. It might not be the most fun, but if your monthly outgoing money is greater than what you have coming in, you gotta do what you gotta do.
Ways to Decrease Monthly Bills
- Cut out expensive cable – this alone can usually save a few hundred dollars each month
- Check your insurance premiums – Call around for lower rates on insurance policies, especially if it’s been years since you’ve done this. If you are able to increase your deductible, you can usually decrease your monthly premium.
- Meal plan and stick to it so you don’t waste money on food that you won’t use or don’t need. Instead of wandering aimlessly at the store and grabbing whatever looks good, make an actual plan for every meal of the week and stick to the plan for saving money on groceries.
- Commit to eating at home and/or bringing lunch to work. Let’s say you spend $7 each day on food instead of packing a lunch. $7 x 5 days each week = $35 a week x 4 weeks = $140 a month! $140 could go a long way to paying down debt.
- Cut any recurring memberships that you aren’t using. The most common is probably unused gym memberships. If you aren’t going, you shouldn’t be paying for it. Newspapers, magazines, or any other unnecessary monthly membership fee should go.
- Do you buy new clothes every month? That can stop. Again – it’s only temporary. More than likely, you have enough clothes for every season for a while and you’ll be ok not buying new stuff for a while.
- Kids and activities – Are your kids in so many activities that you’re sacrificing other bills just to pay for the activities? Have a talk with them and tell them to choose a favorite. One or two is plenty and you shouldn’t be drowning in debt so your child can play one more sport or take one more art class. I know it’s hard. We want them to have everything. But unless they plan to take care of you in your retirement years because you’re broke, it’s time to cut some activities.
- Carpool if possible to save on car expenses and gas
Ways to Increase Your Monthly Income
- Take a second job. If your schedule allows it, add a second job. It’s not forever. But if you can add more to your income with a part-time job, then go for it.
- Get overtime – If you have the type of job that allows for overtime, ask for it and take it! Or maybe you don’t get overtime, but you can add an extra shift here and there. It’ll add up, no matter how small it seems at first.
- Are you a stay at home parent? Can you offer to keep a few other kids for a few hours?
- Do you have a skill that you can offer? Sewing, cleaning, personal shopper, lawn care, pet sitting, or any other trade that can bring in some cash?
- Drive for Uber or Lyft – I know several people that have become a part of these driving programs and they can bring in hundreds of dollars per month.
- Airbnb – Does your house have a room you could offer on Airbnb? This is an amazing way to add some extra income if you have the room and the ability to do it.
- Sell unused items – of course, this won’t be recurring income, but it could give you a boost and declutter your house at the same time!
- Refinish furniture and sell it. Watch out with this one and make sure you don’t go spending $400 on supplies to make $100 profit on a dresser flip. But if you already have the tools and materials, why not find a few things to flip and make some cash?
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Start Paying Down the Smallest Bills First
There are varying schools of thought on this. Some people go with the highest interest rate, others with the lowest monthly payment. Write out all the debts from smallest to largest.
I think starting with the smallest bill first gives you a “win”. I read Dave Ramsey’s Total Money Makeover book years ago and this is the same concept as his debt snowball. It’s not the only way to do it, but it worked for us. And most every library will have a copy of this book – it’s not necessary to buy it. However, I found that it was super helpful to go back and re-read parts when I was losing steam or motivation.
Everyone needs a win when they’re doing something out of their comfort zone or something that may take several years to complete. If you start plugging away at the highest debt first and it’ll take years to pay off, it won’t take long to lose your motivation.
You need to show your brain an accomplishment. It feels good to cross one off the list and you can prove to yourself that you can do this.
Here’s what you do to start paying off debt:
- Get out your monthly budget and make your plan based on when you have income each time during the month.
- Pay all the necessary monthly bills first. Don’t forget to save out for groceries and gas. If you can’t control the spending on your debit card, use cash. It’s a pain and it’s not always the easiest, but it’s the most effective when you are learning self-control over your money.
- Any money that is left after all necessary bills and minimums are met goes to the smallest debt.
- Once that is paid off, start on the next one. And so on.
- Keep going. You’ll get more and more money to throw at the next debt as you move forward.
- Any extra amount will add up. It might not seem like much at first, but don’t discount the power of adding up an extra $20 here or there. It will make a difference.
For some people, this step will take a few months. Others will spend a few years depending on the amount of debt.
Words of Encouragement
Even though this may be one of the hardest things/systems to commit to, it’ll be worth it and you’ll be so proud of yourself for staying on track. Once you see that first debt crossed off your list forever, you’ll have the motivation you need to keep going.
It just takes one win. One win for you to know that it’s worth it and that your end goal is in sight. You’re finally doing something about it. Not living with debt is incredible. You don’t know what might happen in the job market or something catastrophic like your health. If you don’t have mountains of debt weighing you down, your life will be calmer and more peaceful.
Now don’t misunderstand. I’m not saying money = happiness. But I do think that debt = unhappiness. I don’t think money alone can bring you joy. But life is a hell of a lot easier when you aren’t wondering how you’ll be able to buy groceries this month. Or wondering what you’ll do when your hours get cut at work and your income is a quarter of what it was a month ago.
So just get started. The smallest debt. And celebrate your win. Prove to your spouse or partner that it can be done. No matter how small, it’s not insignificant. Maybe it’s only a $50 loan from your mom. Pay her back and be done with it. Cross it off the list.
Or maybe it’s a $300 department store credit card that you signed up for because you could get 20% off. You’ve likely paid way more in interest than the 20% you originally saved. But once it’s gone, it’s gone. No more department store card. That’s a huge win.
Start with the smallest and then keep going. Whatever you paid towards the smallest one now gets paid to the #2 debt on the list.
Bonus Tip – Allow Yourself Some Fun Money
This sounds like the opposite of paying off debt, but there’s a reason you need to allow for some fun money each month. If you’re in a mountain of debt and it’ll be a few years before you’re free of it, you don’t want to get burned out and quit.
Life is meant to be lived and you need to allow yourself some grace and also some fun. If you tell yourself that you won’t eat in a restaurant or get a pedicure for the next three years, that’s not something that many people will follow through with. Sure, you can probably get away without buying a new couch or some other expensive item for the next several months or years, but give yourself a small amount each month to do with it however you please.
Add this amount to your budget each month and don’t feel guilty about using it. If you have a partner, decide on an amount for each of you or plan to use some for a date night or whatever you like. It doesn’t have to be much, but the goal is not to feel like you’re shackled to your house because you’re paying off debt.
It’s exciting when you start gaining traction on the debt and you can see how much more peaceful your life will be without it. But don’t get caught in a cycle where you deprive yourself or your family of everything because you’re getting out of debt.
What you’re doing is hard and the rewards will be wonderful, but it’s a tough journey for some. If you have a little fun money each month to look forward to, it makes it a bit easier to stay focused.
No matter what – just keep going. It might be hard and you might want to scream or get angry at yourself for being in a mess. And fine. Scream a few times – get it out of your system and then move on. You’re already on the right track by telling yourself that you’re doing something about this from now on.
You can’t change the past and you can’t undo a mistake, but you can prevent yourself from making the same mistake again.
You’ll be giving up a few things for a while and it’s ok. When it’s all done and you make that very last payment, you’ll never have to go through that again. You’ll be on your way to a happier self by not being crippled with debt.
- Prepare Yourself for an Emotional Journey – You Can Do It!
- Involve Your Friends/Family
- Write Out All Your Debts
- Commit to Not Adding Any New Debt
- Make A Budget
- Make A Plan to Increase Income/Decrease Bills
- Start By Paying the Smallest Debt First
And don’t forget to allow yourself some fun money each month!
And when you’re ready for the next step towards your financial freedom, get ready to save for your emergency fund. You need one to prevent any future debts.
Congratulations on getting started. It’s a tough ride, but 100% worth it in the end. If you’ve got a debt success story – reach out! I’d love to share your story and inspire others!
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