Debt can be overwhelming.
Probably you’ve accumulated a few thousand dollars in credit card debt and you’re wondering how to pay it off fast before it starts affecting your emotional and physical health.
Or maybe, you have multiple debts; mortgage loan debt, medical debt, student loan debt, and auto loan debt and you need guidance on how to get rid of them as soon as possible.
Well, you’re not alone.
As of 2018, the average American has about $38,000 in personal debt and for most people, things keep getting worse. Fortunately, the common reasons why people (including you) fall into debt can easily be avoided and remedied.
In this guide, we are going to walk you through realistic ways you can pay off debt fast and still experience inner peace.
What kind of debt are we talking about?
Everyone that is in debt has a different debt profile. For some people, their debt could be at a few tens of thousands of dollars, for others it could be well into hundreds of thousands of dollars. Also, everyone has different repayment plans and debt terms.
We took all these differences into account when making this guide. Whether you’re just looking for how to pay off your credit card debt or you’re neck-deep in multiple debts (could be credit card debt, medical debt, and student loan debt), you should be able to use the tips in this guide to get out of debt fast.
How debt affects your credit score
A credit score or credit rating is a number based on the level analysis of a person’s credit report. Lenders, such as banks, credit card companies, insurance companies, and government departments, use the credit score to determine the likelihood of a person paying back credit, who qualifies for a loan, the credit limits of the loan, and the interest rate to attach to the loan.
That said, the higher your credit score, the better your chances of being accepted for a loan, with better credit limits and lower interest rates.
Carrying a huge amount in debt around greatly affects your credit score and reduces your chances of being accepted for future credit. The faster you pay off your debt, the more convincing it is to lenders that you can pay off future credit without stress. This, in turn, raises your credit score.
Failing to meet repayment deadlines or slacking on your loan payments wouldn’t help you pay off your loan within the loan period or help your credit score in any way.
This is why you should always focus on ways to get out of debt fast and how to stay out of debt once you are done paying it off.
Methods to paying off debt
There are two very popular methods for paying down debts really fast. However, these methods only effective if you’re able to keep your spending habits and lifestyle in check.
With this method, you pay off the debt with the smallest balance first. You will have to write down your debts with the smallest one first. Check the illustration below
- Credit Card Debt – $200
- Medical Debt – $1,000
- Student Loan Debt – $30,000
In the illustration above, you will start off with the credit card debt and finish with the student loan debt. This method aims to keep you motivated while paying off debt. Unfortunately, you may end up paying a lot more interest in this method.
The good news is that this method is really effective in getting rid of debt, especially if you’re a low-income earner. You can easily pay off your debt at a slow and steady pace when you begin with smaller debts that you can handle.
Just as it sounds, the avalanche method involves you taking the bull by the horn. With this method, you pay off your debts with the highest interest rates first.
This method might not motivate you to pay off your debts since it will take a little longer to pay off each debt, but it will save you a lot of money on interest payments.
Just as in the Snowball method, you’ll list all your debts in ascending order, but this time, you’ll list each debt’s annual percentage rate (APR) from highest to lowest.
You will start paying off the debt with the highest APR first, and move on to the next debt when you’re done. While this method will save you a lot of more, it is not as motivating as the Snowball method. So if you easily lose faith that you’ll be debt-free., then this method may not be best for you.
9 Creative Ideas On How Pay Off Debt Fast
If you want to pay off your debt in a short period of time, then you’ll have to be extremely disciplined, decrease your outgoings and increase your income.
Below are the possible ways you can fast off your debt as quickly as you want.
A. Get to Know Your Finances
There is no possible way you can
pay off your debts fast if you don’t understand your cash flow.
To know this, you’ll have to create a budget. A budget will help you understand how much you’re spending on bills, outgoings, and how much you can/are putting into your savings.
You should also take note of bills that aren’t fixed.
You can do this with a pen and paper or you can do it with an app. However, if you’re really serious about paying off your debt, then you should get apps like Mint or PocketGuard that will help you budget and save properly.
You should take note of the number of debts you owe when making your budget.
B. Budget Towards Paying Off Debt
Once you understand your cash flow and how much you owe, you can easily create a budget that will help you pay off debt really fast.
You’ll have to assign an amount for paying off debts every month.
If you have a debt of about $6,000 and you want to pay off such debt in 12 months, you’ll have to keep aside $500 every month for debt payment. For some people, keeping aside this amount of money might be difficult due to their annual income, spending habits and bills.
Below, we’ll provide some tips on how you can reach your goals and pay off debt really fast regardless of your annual income, bills and spending habits.
1. Get Rid of Cable
There are many Americans who don’t watch TV and for them, it is more relaxing to meet with other people and have fun in the outdoors than to get entertained by the images displayed on the black box.
However, this might not work for everyone, and you don’t have to completely get rid of your entertainment to pay off your debt. The cost of cable is way more than that of online video streaming services and you will have to consider changing sides if you want to save more money for debt payment.
Below are the plans for Cable TV and Online streaming services for you to compare and decide.
- DIRECTV ULTIMATE – $60.00/month
- DISH America’s Top 200 – $79.99/month
- Spectrum TV Gold – $104.99/month
- AT&T U45O with Internet 1000 – $190.00/month
Online Streaming Services
- Hulu + Live TV – $44.99/month (or $5.99 per month without Live TV)
- Netflix – 15.99/month (best plan)
Looking above, online streaming services are obviously the best option to consider.
2. Change Your Phone Plan
To get rid of debt fast, you have to identify areas that suck up your cash and cut them off. One of those areas is your phone plans. Verizon Wireless offers its customers unlimited talk, text, and data for $90 per month, but you could go cheaper.
Verizon Wireless usually gives discounts to customers who sign up for more than 1 line, but if you are the only one using that phone plan, then you’ll have to switch immediately.
There are other phone plans that are way cheaper and will save you more than $50 per month. Some more affordable options to consider include Tello, Gen Mobile, Red Pocket, Twigby. Mint Mobile, and Simple Mobile.
3. Minimize Shopping Costs
While creating a list of things to buy and sticking to it might be effective (if you’re really disciplined and serious about paying off your debt), you could things differently.
Discounts and coupons are introduced by sellers to attract customers to their products. If you’re looking to save a lot more money on shopping, then you should look out for discounts and coupons on everything you buy.
4. Eat at Home More Often
Eating out is really expensive and according to several people who were able to pay off huge debts in a really short period of time, you should steer clear of restaurants if you want to pay off your debts fast.
Cooking at home might be stressful but it will definitely save you a lot of money. Restaurant food is not only expensive, but the prices are also increasing. This is another reason why you should consider taking out that cookbook and prepare yourself a delicious meal anytime you feel like eating.
However, that doesn’t mean you should eat outside sometime. Simply reduce how often you eat outside (compared to the previous month) and add the extra cash to your debt repayment.
5. Exercise at Home
Exercising is really important and doing so in the right place (probably the gym) and with the right equipment is very important. In the gym, you get the right guides and safe equipment to keep your body healthy.
As it turns out, you can actually cut off your gym membership, go jogging on sidewalks and do your planks, jumping jacks, and pushups right in your room.
We advise that you watch video tutorials on how to do these exercises so that you don’t end up in bruises while trying to stay fit.
6. Save on Utility Bills
If possible, you should save as much as you can on your utility bills. By utility bills, we are referring to your electricity, water, telephone, and Cable TV. We have already talked about how you can save on Cable and Telephone, so we’ll be looking at your electricity and water bills.
Always unplug electronics when they’re not in use and make use of energy saving appliances to keep energy costs as the minimum. Preventing water wastage and repairing faulty pipes are surefire ways you can save on water.
7. Check Your Daily Habits
There are a lot of small spending you’re probably making everyday that amount to huge sums by the end of the month. This could the cost of buying coffee, subscription services (excluding cable), and snacking.
If you want to pay off your debt fast, then you’ll have to check your habits and do away with the ones that take up a significant amount of your monthly income.
Instead of spending on Starbucks coffee every day, you could brew your own coffee or give up coffee all the same (you don’t need to go this extreme). Also, avoid snacking a lot and focus on cooking your meals at home.
There are a lot of things you’re probably doing that you should check. By understanding your cash flow and creating your budget as previously discussed, you can find these unnecessary expenses and cut them off.
Apps like Mint and PocketGuard have special features that help you to identify hidden saving opportunities that could help you reach your saving goals and pay off your debt.
8. Make More Money
To clear off your debts in a short time, you’ll have to make more money. Maybe you have a job with a fixed income, but you can earn more and get your debt off your back in no time.
Below are some options that will help you make more money without affecting your present job.
- Work Overtime: If you’re being paid hourly, then working overtime is a great way to get more cash into your hands and get yourself out of debt. Depending on your lifestyle and your place of work, you can negotiate for a few extra hours with your boss.
- Take More Jobs: You could take on more jobs and earn more money. If you don’t work on the weekends, you could use the free time to earn more money. This is more realistic for those that are single or living alone, but if you can make it work for you and your family, then you should go ahead with the idea.
- Freelance: Skills like copywriting, graphic design, programming, and animation are in high demand. If you have any one of these skills, you should consider signing up for freelance sites like freelancer, Fiverr, and Upwork. These sites could help you make anywhere between a few hundred dollars to tens of thousands of dollars every month.
While this idea could really help you make a lot of cash, it is really difficult to earn from most freelance sites at the moment, so you might have to consider other options like writing for Textbroker, Boost Media, Writers Domain, and BKA Content.
- Sell Your Stuff; Depending on how much you owe, you might have to do away with some of your stuff. There are possibly one or two things you have (which probably got you into debt in the first place) that you could do away with. Today, you can sell anything like clothes, books, electronics, and kitchen appliances online.
- Work for Amazon: If you own a car, then you can make more money by delivering packages for Amazon. This is a very easy way to make more cash as you can pick up work whenever you want and make as many deliveries as you want to. You can earn a few hundred dollars a month based on how many deliveries you can make.
- Work for Wrapify: Wrapify is an advertising company that pays you to display ads on your car. The company will have your car wrapped with different ads and you get paid to make sure people see those ads.
9. Live within or below your means
One of the reasons why many Americans fall into debt is because they spend more than their monthly income. To save, you’ll have to do the following.
- Sell Your Expensive Stuff: Some expensive things you own probably cost more to maintain. While they might make you look classy, they are in no way helping you to become debt-free faster. The right approach would be to sell these items and get more affordable ones that will save costs on maintenance. You could also use the extra cash from the sales to pay up your debt.
- Spend Carefully: Depending on the amount you owe, you should be spending about 10 – 50% of your monthly income to pay off your debt. If you want to pay off in a shorter time, you’ll have to limit your spending and use more money to pay off debt.
Consider cheaper options when paying for an item, however, you should not sacrifice quality due to the cost or you’ll spend more on maintenance in the long run.
Staying Out of Debt
It is way better to stay out of debt than to pay up the debt. That said, most people find it hard to stay out of debt even when they haven’t finished paying up their previous debts.
To stay out of debt, you’ll have to create a realistic budget and stick to it, live within your means, and give up your credit card if you find yourself drawn to spending frivolously.
Doing all these takes a lot of discipline and you can get that discipline by reading some guides on how to stay out of debt.
The books listed below will help you stay out of debt while you strive to live the American dream.
The Total Money Makeover by Dave Ramsey is your guide to financial freedom. This book will give you control of your money and help you fit your expenses into a manageable budget.
The best thing about this book is that everything is pretty much straightforward. You’ll get to save and stay off your debt by following simple effective techniques.
This book won’t only help you save and budget, it will help you invest right and build your wealth.
Author: Dave Ramsey
Current edition: 1st Edition (September 2013)
How to Get Out of Debt, Stay Out of Debt, and Live Prosperously*: Based on the Proven Principles and Techniques of Debtors Anonymous
If you’re looking for a book that will help you manage debt effectively and keep you out of debt, then you should go ahead and get this book. How to Get Out of Debt, Stay Out of Debt, and Live Prosperously by Jerrold Mundis is one of the few books that give you actual tips that will help you attain financial independence
The book focuses on changing your perspective on debt and money. It also provides actionable tools that you can use to dig yourself out of debt once and for all.
Author: Jerrold Mundis
Current edition: Revised Edition (May 2012)
The Spender’s Guide to Debt-Free Living: How a Spending Fast Helped Me Get from Broke to Badass in Record Time
The Spender’s Guide to Debt-Free Living by Anna Newell Jones is a book that not only gives you the information you need to understand debt but also provides you with activities and tasks that can eliminate debt and keep you out of debt for good.
With this book, you can easily create a realistic budget, monitor your spending, save and get out of debt as soon as possible. For most readers, this is one of the best books on debts ever written.
Author: Anna Newell Jones
The Debt Escape Plan: How to Free Yourself From Credit Card Balances, Boost Your Credit Score, and Live Debt-Free
Beverly Harzog offers you the secrets to paying up your debt and staying out of debt in her 288-page book. This book has been highly recommended by many financial experts for those who are neck-deep in debt with plunging credit scores and seeking a way to get to the top.
Beverly Harzog presents this book in a conversational style which makes it easy to read, understand and practice. The techniques are pretty realistic and should be easy to implement for those ready to completely change their finances.
Author: Beverly Harzog
Current edition: 1st Edition (February 2015)