How to Start Paying Off Debt Now #DebtIsNotForever

So many of us live our lives in debt. We see most people around us living in debt. We have mortgages, car payments, student loans, credit card debt, and we keep on charging more. As we make minimum payments (maybe a bit more, or even a bit less), we expect to have debt…forever. But it doesn’t have to be that way. For many of us, what it takes is a change in mindset and a willingness to start paying off debt now.

How to Start Paying Off Debt Now

That change in mindset isn’t always a small thing, but it can be a revelation. Most of us can live off less than we can earn, and some of that difference can pay down our debt. #DebtIsNotForever. When you begin to think about getting out of debt, can you imagine what your life would be like without seeing interest on your credit cards each month? Without getting a mortgage or car payment bill? What could you be doing with all that money…Living out your dreams? Retiring early? Funding your children’s education? Remodeling your home? Travelling? Starting your own business? Donating to charity?

This is not one of those times when you imagine what your life would be like if you won the lottery. This is within your reach. But you have to believe in it and you have to want it. The first steps are often the most difficult, but they are doable. Here are 5 steps to start paying off debt now:

Earn as much as you can

It’s easy to say that you don’t make enough money to pay off your debt. But are you taking in as much money as you can? Perhaps you deserve a raise at your regular job and need to point out to your manager how much your contributions are worth. Or maybe you need a change in jobs. But your earnings don’t have to end there. You can always take up a side hustle, today’s term for a side job to earn income. It can be as simple as answering surveys online, selling your crafts, tutoring a local student, or walking the neighbor’s dogs. Or you can declutter your home and sell off items you no longer use.

Track your expenses

It’s very difficult to set goals and make progress if you don’t know where your starting point is. If you aren’t already, start tracking where your money goes. Most people are amazed at what they actually spend when confronted with the cold, hard numbers. So use an online tool or app, a spreadsheet, or a simple pen and paper, and tally up what you spend your money on. Only then will you have a clear picture of what categories can be cut back.

Set a budget

Once you know where your money is going, set a budget for where you want it to go. You should “pay yourself first”, especially if you don’t have an emergency fund, to start building up some savings. Next figure out your necessary expenses and from there, see what you have left to divide between discretionary expenses and debt repayment. Even an extra twenty dollars a month toward a debt will start to make a difference in the interest you owe.

Start living on less than you earn

First thing is to stop buying things you can’t afford. If credit cards are you downfall, it may be time to put them away and work with cash instead. Paying off debt doesn’t work if you’re creating new debt at the same time.

Next, keep revising your budget by shaving a bit off the categories where you know you can save money. Need ideas? Check out my tips to save on groceries, dining out, and shopping for inspiration.  Once you reach those revised budget goals, shave a bit more. The faster you save money, the faster you can pay off your debts and be free.

Apply that difference to your debts

Once you’ve made some room in your budget for paying down your debt, you’ll need to decide where to apply those funds. Make a list of all your debts, their balances, and their interest rates. Then you can either prioritize your smallest balance first, while making minimum payments on the others, or prioritize your highest interest debt first. By sending your newly found funds to the smallest balance, you will pay off one of your debts sooner, which can gives you motivation to keep going (sometimes known as the debt snowball method). By paying down your highest interest balance, you’ll generally be saving the most money (sometimes known as the debt avalanche method). Decide which method is for you and stick with it, putting as much as you can afford towards your high priority debt.

If you still feel like debt is inescapable, it’s time to take a look at what paying off your debt can really do. Check out these calculators from Bankrate.com to see how long/how much it will take to pay off your credit card debt and how much time & money you can save by pre-paying your mortgage principal.

To be honest, sometimes I’ve felt like debt will be hanging around me forever. My credit card debts have been gone for years, but my mortgage still has a long way to go. My wife and I have been pre-paying our principal for awhile now, but only by a small amount each month. So this year, we’re stepping it up and we’ve set up a plan and a budget to allow us to pre-pay more.

My point is that while the journey may be long and slow, it starts with a single step. Start paying off your debt today and you’ll be on your way. And just remember, #DebtIsNotForever.

Have you started your journey to debt freedom? If so, what’s your best advice for those just beginning? If not, what’s holding you back?

6 Comments

  1. Jayson @ Monster Piggy Bank

    My advice is find a support group because in this debt-repayment journey there surely comes a time that you lose the big picture and feel discouraged. And knowing that there are people who support you and have the same situation, it feels like you’re not alone and you are with them in this journey. It’s something like together, we’re better! Right, Gary?

  2. I make debt payments on student loans, our mortgage, and car loans. With that being said I think you’re missing out on profits if you don’t take advantage of low-interest debt, such as mortgages and auto loans. It also makes sense to invest in your education (in most cases) for a higher income. I think debt gets a bad rap and it should be balanced with more commentary on how it can be leveraged for good.

    1. Going into debt for the advantages of owning a home, car, and better education are ways to improve your circumstances in life. Using debt sensibly is the only way many people have to achieve those objectives. However, the ultimate goal is to eliminate debt and its associated costs and stress. When you mention the profits of taking advantage of low-interest debt, I’m not sure if you’re referring to asset appreciation or having money for alternate investments, or something else. Even low-interest debt has a cost, and the asset you’ve gained may not provide profit. Homes can lose value, good education does not guarantee a high-paying job and those funds could be better used to achieve other goals. If you’re not paying down low-interest debt and using that money to invest that money instead, there is risk involved. I agree with you, DC, that debt can be leveraged for good, but I still feel trying to pay it down as quickly as you can afford to do so is the way to go.

  3. Getting out of debt is definitely a very tough thing to do. You can never give up because if you do things will never change. What are the odds of winning the lottery? Living on less than you make is key to getting out of debt, no question! Once that debt is paid off, the extra you have is money in the bank:)

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