Debt sucks. There is no getting around that.
For the majority of the American population, debt will suck the life out of you. If time and money permits, always pay off debt fast.
Sure there are some ways to utilize debt to grow wealth, but for most Americans we have a love-hate relationship with debt. We love to use it and hate to carry it.
Some of us treat debt similar to an unhealthy relationship. We know we’re supposed to pay off our debt fast but we’re too comfortable to do anything about it. That’s the point where I was at.
One of my resolutions is to finally get out of debt completely. We have just under $10,000 to go.
In September (of 2016), we finished paying off the two biggest debts that we had totaling about $26,000. We set a goal in October of 2015 to pay them off as quickly as possible. I calculated that we should be able to pay them off by August of 2016. One month behind, but we did it!
We paid off $26,000 in 11 months!
That saved us $584.48 a month combined. What would you do with almost $600 extra a month?
For some, that means you’ll finally be able to take a budget vacation. For others, that means you can finally start saving up for that new home, or start a new career. But for everyone, it means freedom.
Freedom rings, and it’s calling both you and me to pay off our debts faster.
From October 2015 to September 2016, I made a conscious and concerted effort to pay off our debt as fast as I could. It wasn’t easy. In fact, it was quite difficult. I’m not going to sugar coat it for you. Paying off debt takes a lot of hard work. It won’t be easy for you, but I can promise you it’ll be worth it.
So what are some strategies that you can use? Let’s take a look.
17 Helpful Ways to Pay Off Debt Fast
Now, some of these I have developed myself and some I have found elsewhere, but I’ve used most of them. I can guarantee you they all will be beneficial in helping you pay off your debt and will definitely accelerated your progress.
1. Paying Off Debt with Debt Snowball Method
So this is the first thing I intended to do from the start of paying off debt, and I continue to use it to this day. In typical Debt Snowball fashion, throw everything you have at the debt with the lowest balance. Keep paying the minimum monthly payment on everything else.
Then, after you pay that one off, use the money you were using to pay off the first debt and combine, or snowball, that money in with the payment of the next lowest debt.
Essentially, you are paying the exact same amount out of pocket month to month until you pay off your debt.
The power is in the snowball.
The beauty in this method is that it doesn’t require any lifestyle change whatsoever after paying something off. You’re already using that extra money toward debt so why not continue to use it to pay off your of debt faster?
Let’s put it this way. Not using that extra money to pay off debt fast can potentially add months to your payments and quite a bit of money to your total debt. The faster you pay it off, the less interest you pay.
Want a head start on the snowball method? Consider refinancing some of your highest interest rate debts with a personal loan. Everyone’s circumstances and eligibility are different, but if you can borrow at a lower rate than your current debts and use what you borrow to instantly pay off the high interest balances, you’ll be left with the same amount of debt — but a lower overall interest rate. Use our loan matching tool here to see if a personal loan makes sense.
2. Get a Side Hustle
Do you have a hobby that you really enjoy? Maybe you are really good at crocheting. Perhaps you have a talent for music or art.
Why not make some money doing some of those things?
You could do something as simple as pick up a job serving at a restaurant on the weekends. If you’re handy with a camera you could shoot weddings on the weekends. Make a music album and sell it!
Side hustles can be a great way to boost your income by quite a lot of money! What do you do with that money? Why, pay off your debt faster, of course.
Here is a list of 100+ ways to make some extra money. There’s something on the list for everyone, so find something you enjoy and start earning some extra cash.
3. Look at Your Monthly Payments for Inspiration
Now this may sound weird, but your monthly payments can give you the inspiration to keep going.
When I was working on paying off the $26,000 in 11 months, I always kept in my mind that I was putting in all this effort to be able to free up $584.48 in monthly payments. It really kept me going!
Again, what would you do with that extra money? That’s over $7,000 a year.
You could invest that money, or save it for a family vacation, or just rest easy knowing that you have a little bit of a cushion on your monthly payments.
Remember, no debt = freedom.
4. Adjust Your Tax Withholding
One of the easiest ways you can increase your income every month is not actually through work. It’s through the IRS.
The IRS reported in February 2015 that the average tax refund was $3,120.
That is a lot of money.
That $3,120 would give you an extra $260 a month outright! Imagine what $260 extra would do to help.
I adjusted the withholding for both my wife and me in order to minimize the size of our return. Then I used that extra monthly income to help us pay off our debt, giving us a bigger snowball from the onset.
I’m going to try and say this as nice as possible:
Stop giving the IRS an interest-free loan.
I guarantee that you know how to manage your money much better than the government.
Related: How to Get the Largest Possible Refund
5. Use the Extra Checks To Pay Off Debt Fast
If you are paid every two weeks there is something spectacular that happens. Because there are 26 pay periods, twice a year you will actually get paid three times in a month rather than the usual two.
Use those to your advantage!
Budget monthly like normal, planning for just two paychecks. Then, twice a year you will literally have an entire paycheck extra to put it toward your debt. Talk about an accelerant!
My wife gets paid every two weeks while I am twice a month. There were two months in that 11 month period that we were able to use an extra check of hers. That gave us a huge leg up on our debt and greatly accelerated the payoff.
6. Use Cash Windfalls to Pay Off Debt
If you are at a job that has a performance incentive plan that pays out bonuses for good performance, then that is money ripe for debt payoff!
Because of my performance and how well my company did, my bonus ended up being $1700 after taxes. That’s $1700 I didn’t need for anything else. All of it was completely extra.
I put that directly toward our debt and it was huge! That bonus took about 6.5% off our $26,000 debt just from doing a good job at work.
If you get a bonus, and there are no pressing financial emergencies you really need to use it for, then use it to pay off a big chunk of your debt.
7. Use Your Emergency Fund
Now, this is something not all of you will be able to do or may agree with.
If you have a decent size emergency fund and a decent amount extra you are putting toward your debt each month, I recommend dropping your emergency fund down to $1,000 and using it to help accelerate your debt pay off. For reference, this is the same $1,000 Dave Ramsey suggests in his first Baby Step.
We took our emergency fund down from $9,000 down to $1,000. We considered the likelihood of a financial emergency actually happening and how long it would take us to build up the fund to where it was when our debt was paid off before making the decision.
After all the calculations, we decided that the benefits far outweighed the risks. We pulled the trigger and $8,000 worth of our debt was immediately gone! It. Felt. Amazing.
Now, I’m fully aware that this is not a method for everyone. There is a certain level of comfort with having a decent sized emergency fund.
And that’s what it’s all about.
I can’t stress this enough. If you are going to use any of your emergency fund, only use what will make you feel comfortable. If you don’t feel comfortable using anything, then by all means, keep your emergency fund fully stocked.
I definitely recommend not going below $1,000 just in case you get one of those surprise emergencies.
8. Reward Yourself
One of the things I definitely didn’t want to do was live in poverty just to pay off debt fast. In my opinion, being beholden to your budget so you don’t have to be beholden to your debt is not the way to go.
If I were to cut out budgeted money for fun, I would go crazy not being able to do anything.
When I decided to take my debt to the gallows, one thing I did was make sure that we would have enough to keep our vacations. While paying off all of this debt, we went to Disney World twice, took a weekend Colorado trip as a couple, and a week-long Colorado trip as a family.
For both Colorado trips, we decided to drive instead of fly. Opting for the 14 hours drive saved us about $3000 combined for both trips.
Another way we were able to keep our vacations was making sure we stuck to our other budgets like glue. We made sure we didn’t splurge on family affairs and went on affordable dates. If we didn’t have the money in the budget, we waited until next month.
We definitely adjusted a little, but we wanted to make sure we were still living and did NOT cut the budgets we had set for fun.
Speaking of budgets…
9. Use Leftover Budget Money
This one is simple enough, but it’s powerful. If you are budgeting $100 a month for something and that bill ends up being $80, then put that $20 toward your debt.
I do this a lot with our fuel budget. Gas has been decently cheap country-wide compared to what it was a couple of years ago. I never adjusted our gas budget to reflect the cheaper gas until recently.
Whatever was leftover in our gas budget at the end of the month went straight toward debt. Sometimes, this amount was upwards of $50 to $100.
Using leftover budget money can be especially powerful if this happens with a few of your budgets, rather than just one.
10. Put Your Raises Toward Debt
What usually happens when you get a raise? Maybe this is just my tendency, but I have to stop myself from saying, “Yes! I can spend more!!”
Do yourself a favor and don’t do that.
The official term for this is called Lifestyle Inflation. Simply put, Lifestyle Inflation is when you spend more money to make up for the raises you’ve received.
Instead, why not put all of that extra money toward debt? Say you get a raise that gives you an extra $300 a month and you’re used to having just $100 leftover. You can keep your $100 cushion and put that $300 directly toward your debt each month.
I did this and it put a huge dent in our debt balance. It literally took many months off of the amount of time it took to pay off our debt! Getting a raise isn’t a license to spend more. It’s an opportunity.
Willpower is the most powerful weapon in your arsenal. Without willpower, most of these other steps wouldn’t even be doable.
You may need to change your mindset like I did. You may need to decide on a reward for yourself that you only get if you pay off debt fast. That way you can keep your eyes on the prize. It may be as simple as having an inspirational quote delivered to your inbox everyday.
Do whatever it takes to keep your will. Reward yourself after each credit card you pay off. Buy yourself some coffee. Take some “you” time. These steps are there to help you, but you have to want to do them.
The nice thing is that willpower is like a muscle, which means you can train it.
Just don’t do too many willpower-intensive tasks at one time. Otherwise, you’ll burn out and derail your get-out-of-debt train.
12. Change Your Mindset on Money
Webster’s dictionary defines mindset as a person’s attitude or set of opinions about something. This attitude defines and informs everything from our view on the world and others to how we make decisions.
Changing your mindset on money will help you view it as a tool rather than a master. After you realize that you are in control of your money, and not the other way around, you can start using it how you want to use it. You can make it work for you.
To change your mindset, try giving yourself an artificial pay cut by having some of your check directly deposited in your savings account instead of your checking. Budgeting for fun (as I mentioned above) as well as being more generous are other great ways to change your mindset.
Related: 4 Ways Your Lifestyle is Causing Money Problems
13. Move to a Different Part of the Country
Now this one may seem a little extreme, but moving to another part of the country to reduce your cost of living can give you quite the boost to your disposable income.
Obviously, you’ll want to do your homework on this first. You would potentially have to look for a new job if your company doesn’t have an office where you work. You will also want to make sure you will have everything you need around you. It may be worth to find someplace that is comparable to what you have around you now as far as amenities, shopping, dining, and entertainment are concerned.
Why might this be worth it?
According to Sperling’s Best Places, a comparison between Denver, Colorado and San Francisco, California cost of living reveals that a salary of $375,000 in Denver would need to be at $801,765 to compare.
That is more than double the salary to have the same standard of living in San Francisco!
Your city may be choking your ability to pay off debt fast. Even a move from the city to a suburb has the potential to save quite a bit of money. Moving may be worth your time and effort.
14. Move back home
Now I realize this will not be for everyone. However, your rent or mortgage payment is generally the highest monthly payment you have. If you were to get rid of that payment, you would have a huge chunk of change to put toward your debt every month.
If you are in a place in your life where it would be easy for you to move back in with your parents, this may be a great option for you. Obviously, you’ll want everyone in agreement. If you’re single, it’s a bit easier. You just have to talk with your parents. If you’re married with kids, it’s definitely doable but will be more difficult to get everyone bought in.
Still, it may be worth looking into.
If you pay $1,000 in rent right now, even paying your parents a small amount of rent would give you a ton more to put toward your debt. It’s a great move, but definitely not for everyone.
15. Impulse Saving
We’ve all heard of impulse spending, right? That’s where you see something in the store that you didn’t intend on buying and then buy it “on impulse” (hence, the name).
Well, I like to call this Impulse Saving.
The Idea is this. If you’re in the store and see, for example, a $20 movie that you don’t really need, instead of impulse buying that movie, you transfer that amount toward your savings account.
Boom! Impulse Saving.
To use this trick to help with your debt, simply use the impulse money saved to put toward your debt rather than saving it. You will either have a lot more money to pay off debt or learn how to control your impulse spending (or both!). Not a bad outcome either way.
16. Sell Your Extras
With the holidays now over, chances are you have some extra things around the house that you may not want or need anymore. A great way to bring in some extra cash to pay off debt fast is to sell those items.
Do you have extra DVDs that you don’t watch laying around? Have you thought about selling old video games or knick-knacks lying around in the basement?
Try going through the items you hardly use, sell them at a garage sale or on eBay, and then use that money to knock off a chunk of your debt.
17. New Bank Account Sign-Up Bonuses
Once every couple of weeks, we get a flyer in the mail from Chase Bank offering to give us up to $500 to open a new account—$300 to open a checking account with direct deposit and $200 more if we keep $15,000 in a savings account there for three months.
We haven’t done this yet, but it’s on the to-do list. Even if you don’t have $15,000 laying around for the $200 bonus, opening up a checking account and using direct deposit will net you an extra $300. Put that toward your directly toward your debt!
The Finish Line is In Sight
Debt has been a thorn in my side for much of my adult life because of my addiction to no-interest financing. I was able to overcome that largely with a mindset shift toward money.
That’s why I set a goal to finally pay all of our debt off. After we pay off our remaining debt of just under $10,000, the only debt we’ll have left is our home.
Smell that? I smell freedom! Implement any or all of these 17 steps and I guarantee you’ll pay off debt fast.