Is debt keeping you from experiencing financial freedom? These six simple steps can help you pay off debt fast, even with a small income.
Debt: (n) a four-letter word with the power to put chains on our hands and knots in our stomachs.
It’s reported that the average American household carries $137,063 worth of debt, and much of this is acquired before graduating from college!
Debt is the biggest obstacle to financial freedom and one of the reasons many people who desire to stay home just can’t.
How we paid off $30,000 in under a year (on a tiny income)
My husband and I graduated from college with $30,000 in student loan debt and no real jobs.
Upon graduation, our combined household income totaled $20,000.
Keep in mind, we were raising two children at this time so we had plenty of expenses besides our student loan payment.
Even just the thought of our student debt was enough to put knots in my stomach.
With lots of determination, hard work, and prayer we paid off our student loans in under a year.
We have a pretty cool get out of debt story that I’d love to share with you in more detail sometime. Today, I will just outline the simple steps we took that enabled us to pay off debt fast.
I feel like I’d be doing you an injustice if I didn’t pause here and recommend Dave Ramsey’s Financial Peace University. I highly recommend this course and feel like everyone needs to know about it. In addition to Financial Peace University, Dave has lots of free resources and tools on his website and regularly posts great content to Facebook. I recommend following his baby steps which can be found here.
Okay, thank you for indulging my shameless plug. Now, without further ado…
Here are the very simple but extremely effective steps we took to pay off debt fast.
As Dave says, “a budget is telling your money where to go instead of wondering where it went”.A budget is the single most effective money management tool available. You don’t need anything fancy. You can use a fancy spreadsheet or a simple piece of paper to make your budget.I like to use the every dollar ap on my phone.
Click here to download my free printable Complete Budget Binder.
- Set a Goal
Consider all the variables (amount of debt, total income, expenses, and timeline) and set a reasonable goal for paying off your debt.
I recommend making your goal specific and time sensitive.
Instead of simply, “to pay off debt fast”, a more specific goal would be: “to be totally debt free by August 2018”, or “ to pay off the car by September 2018”.
Write your goal in big red letters on a calendar, and celebrate small victories along the way to stay motivated and pay off debt fast.
- Create a Debt Snowball
A quick, strategic way to pay off debt fast is with the debt snowball. This is a strategy with which you pay off your smallest debt first in order to free up money to put toward the larger debt.Don’t worry about interest rates or which creditor is pestering you. Just stick to the plan and do what you can. This takes time and perseverance, but it works.
- Practice Saying No
What can you live without for a little while in order to funnel more money toward becoming debt free? Could you opt to watch a movie on Netflix instead of at the theater? Instead of driving to work could you walk or ride a bike? For that matter, could you get rid of a second vehicle or downsize your housing? Could you take a turkey sandwich to work instead of eating out? You may be surprised by all the things you could say no to when you’re determined to reach your goal and pay off debt fast.
- Generate Income
Paying off debt is extremely difficult with a small income. When we were paying off our student loans, we made a combined $20,000 per year. To supplement our income I started a small photography business on the side. My husband did handy-man jobs here and there. If you are serious about paying off debt fast, you may need to get creative about generating extra income.
If you need ideas, consider one of these side jobs or try selling your old items on eBay or craigslist.
“Sell so much stuff the kids think they’re next.”-Dave Ramsey
- Don’t Give Up
You can do this. Imagine the freedom and liberation you will experience when your debt is gone. Keep working, keep persevering. It’s worth it.
“Sometimes it’s the smallest decisions that can change your life forever.” —Keri Russell
Best of luck!