At age 28, my wife Brittany and I were sitting at the dinner table and decided we were sick and tired of living in debt.
We had started with over $40,000 out of college and slowly chipped away at it over five years getting it down to $25,000.
We knew our debt was holding us back from living a life of freedom and committed to attacking and destroying it with everything we had.
In June 2018, we started our debt-free journey, and by December 2018, right before Christmas, we became debt-free.
Below are the 11 strategies we used to pay off over $25,000 of debt in less than 5 months!
How To Pay Off Debt This Year
1. Organize Your Finances
The very first thing we did was get out a pen and paper to start to organize our entire financial picture.
We needed to visually see where we were at and come up with a plan to start to pay off our debt and knock out all our personal loans.
We wrote down the type of debt we had, amounts, interest rates, terms, etc.
By simply organizing our finances visually and seeing the big picture we were able to see how we could attack our debt and become debt-free.
It not only gave us the confidence to really go after paying off our debt but in doing it together we become an unstoppable team.
2. Start A Budget
One thing that we always preach on The Savvy Couple is creating a plan for your money and sticking to a monthly budget.
Learning how to start a budget, we can stick to and create good habits around was the key to paying off our debt.
Without having a plan for your money, you won’t pay off debt faster, and you’re more likely to add more debts to your plate!
In college, we started budgeting with a pen and paper to see where our money was going and where we could save. We have always treated our money very respectfully, knowing how hard we work for it.
But being able to save money and get a successful payoff debt strategy took a bit more.
After getting married, we moved our budget electronically over to Mint. There are plenty of budgeting and money management apps for you to choose from. You just have to find one that works best for you.
If you look around at any financially successful couple, family, or business, they all have a budget they use as a guide for their money.
3. Pick A Debt Repayment Strategy
There are a bunch of strategies for paying off your debt. You want to pick a debt repayment strategy that works best for you and your unique situation.
Whether you have consumer debt, credit card debt, or student loan debt, it really doesn’t matter.
Personal finance is just that, personal. You can’t ignore the deep feelings, internal battles, and emotions surrounding your finances.
After going through this ourselves, we highly recommend using the Dave Ramsey Snowball Method over the debt avalanche method or debt consolidation.
We tried several methods during our debt-free journey, and by far, the debt snowball method was far more motivating and effective.
It helped make things easier, and seeing the numbers get knocked off so quickly was more encouraging for us.
But here are 3 debt repayment strategies we’ve seen and used over the years:
Debt Snowball Method
As I said before, we prefer the debt snowball method to crush our debts!
The debt snowball method is when you pay off the smallest debts one at a time until they’re paid off and you can focus.
However! One big mistake people make is forgetting to make minimum payments on all debts. You still have to make those minimum payments, folks!
Here are the basic steps of the debt snowball method:
- List your debts from smallest to largest remaining balances and ignore interest rates.
- Make the minimum payments on all debts except the smallest one. Attack the smallest one with everything you have- put extra money on it whenever possible.
- After you pay off the smallest debt, take the money you were paying on that debt and roll it into the next lowest remaining balance debt. Boom, it’s a debt snowball!
- Repeat this method until you cross off the very last debt.
Debt Avalanche Method
The debt avalanche method is also called debt stacking because you stack up your debts with the highest interest rates on top so you can pay them off first.
I do like this idea, and it worked out for a while, but it was hard paying so much on big loans and feeling like it wasn’t making a big enough dent in our debt.
However, the debt avalanche method may work for personal loans and college debt that can loom over your shoulder for a lifetime if you’re not careful.
Here’s how you can use the debt avalanche method in a few steps:
- List your debts from the highest interest rate to the lowest, ignoring the remaining balance you have to pay off.
- Make the minimum payment on all debts except the one with the highest interest rate. Attack the highest interest-rate debt with everything you have.
- After you pay off your highest-interest debt, take the money you were paying on that debt and roll it into the next highest-interest debt on the list.
- Repeat this method until you cross off the very last debt.
Debt consolidation is when you take all your multiple debts and roll them all up into one debt.
This option can make it possible to get a lower rate in general, which is great is you have multiple loans and credit card debt with interest rates of over 15%.
Some people use balance transfer credit cards, personal loans, or debt consolidation loans to transfer debt and get 0% interest on their debts for a short period.
A debt consolidation loan is the most typical way to get money to pay off debts and then have one loan to pay instead of several. I can see why that’s tempting.
However, debt consolidation doesn’t always work out perfectly for most people in the long run.
You may get a lower interest rate when you choose debt consolidation, but you may also have a longer payoff period- meaning more years in debt and possibly more money in interest overall.
I only recommend debt consolidation as a debt repayment strategy if having multiple loans or credit card debt is too hard to manage and you’re often late on payments, incurring more fees.
Debt consolidation may help if you roll up a few credit card debts together and put down larger debt payments to pay it off, but I think this will be less helpful than the debt snowball method.
4. Set Realistic Goals
This is a debt payoff tip that should be talked about more. When it comes to setting financial goals, it’s always best to set realistic goals you can actually achieve.
When you’re making a plan to pay off debt, be realistic, and set milestones you want to hit along the way.
One of the best ways to ensure you are setting realistic goals is by using a debt payoff calculator or a debt payoff planner.
When we had $25,000 of student loan debt remaining, we set a goal to have it paid off within a year. This was realistic for us at the time, knowing our current income level and our monthly expenses.
Some personal debts may be larger and need more time to pay off, especially if you aren’t earning as much as you want.
Sit down and think about how much you can feasibly pay each month and how long it may take to pay off debt.
Our payoff plan went above and beyond our expectations, which is what we all hope for!
We were able to pay it off much faster than we thought, making it even more special to beat the goal we set.
We found many ways to save money and make more money, so remember that more money put towards debt isn’t the only way we reached our goal sooner.
5. Learn How to Live Frugally
Besides paying off debt, you also need to figure out how to accrue less debt from here on out!
Learning how to live a frugal and happy life is one of the best things you can do for your financial future.
Being frugal is much different than being cheap. Being frugal is always finding the best value for your money, while being cheap is finding the lowest cost.
After you create a budget, next is going through it and finding where you can cut costs to free up extra money to go towards your debt.
The three biggest categories to look at first:
This normally accounts for more than 50% of a family’s budget. So focus on saving more money in these areas before moving to others.
6. Cut Out Food Costs
Food spending can be a big part of credit card debt, and we found out how hard it was when our family grew from 2 to 3 and now 4 of us!
One area we could save a bunch of money in was our food costs once we really sat down and reviewed our credit card debt and receipts.
We found things we could easily make cheaper, forgo entirely, and find cheaper in other stores.
We started to meal prep, make cheap family recipes more often, and only ate out on rare occasions.
We also used Ibotta to help us earn cashback on our grocery shopping, meaning some of our credit card debt turns into extra money back!
We started focusing more on our health through intermittent fasting and counting calories. So not only were we saving money, but we were also losing weight and getting healthy.
One of the extreme ways we cut our food costs was by playing a game we call “bottom of the barrel.”
When our food was getting low in the house, we would try and go another couple of days to really eat our house dry.
This helped prevent food waste and made us creative in making cheap meals.
7. Increase Your Income
You can only save so much money in your budget before you run out of areas to cut.
You don’t want to cut out all fun and activities; those things are still worth their costs.
But what do you do when you’ve cut out what you can and feel like there isn’t enough money left to pay off debt?
After you have your monthly expenses to the “bare bones,” it’s time to start looking for ways to increase your income.
There are literally hundreds of ways to increase your income.
Some of our favorite ways are:
- Taking online surveys
- Starting a side hustle
- Flipping items
- Picking up a second job
- Monetizing our hobbies
By increasing your income by even $100/month, you will drastically increase your ability to pay off debt faster.
8. Start An Online Business
One of the best decisions we made was starting our online business. It was really the spark and fire that allowed us to attack our debt and become debt-free so quickly.
A 9-5 job is great as it is a fixed, steady, and reliable income, but it can only get you so far.
Starting your own business allows you to set your own hours, do work that you are passionate about, and have no limit on the income you can make.
We started our blog in July 2016, and within two years, we started making $10,000/month with it. By the end of our third year, we have made over $250,000 and were both able to quit our jobs.
Our success was not overnight but starting a business and putting in the work for a couple of years was worth every second.
Perfect online businesses to start:
- Become a Proofreader – Love to read? Why not get paid to read other’s work and find spelling/grammatical errors. You can easily earn a few hundred dollars a month in your spare time.
- Start a Money-Making Blog – It takes a lot of effort upfront but once you start seeing the success the sky is the limit. Our blog brings in over $10,000 per month!
- Start a Facebook Side Hustle – Want to make money using Facebook. There are plenty of small business owners in need of marketing help. The perfect flexible side hustle anyone can start.
- Tutor for BookNook – If you love working with kids and have some teaching experience why not earn up to $22/hour tutoring online?
- Flip Items on eBay and Amazon – Love going thrift shopping and finding neat things to turn into cash? Start your own flipping business today!
9. Stick To Your Plan
Now that you have a plan to pay off debt and crush those personal loans, it’s time to put your plan into action- and stick with it!
It’s not a matter of what but a matter of when things will get in your way on your debt-free journey.
Even if you have the perfect plan and have done an excellent job of creating new positive habits there will be hurdles thrown your way.
This is why it’s so important to have an emergency fund set up so you can easily handle things that get thrown your way.
The key is being flexible and keeping your eye on the prize. Know that you are capable of overcoming obstacles and getting right back on track.
When things came our way we found the best thing to do was pray and give it to God. We let him guide us and lead our journey.
10. Celebrate Your Wins
What’s the point of setting goals and achieving them if you are not going to celebrate?
Whether it’s making your first debt payments or your last, you need to be celebrating all your wins.
By using the debt snowball method and celebrating each win along the way you will ensure you keep your motivation and drive at an all-time high.
You can celebrate by going out to dinner, opening a bottle of wine, or simply having a family dance party. The key is making sure you celebrate your victories and keep moving forward.
11. Don’t Stop The Savings
One day, in the near future, you’ll join us and become debt free!
It’ll be a huge weight off your shoulder, and that freedom is an amazing feeling.
But don’t let that feeling lead to mistakes!
I know many people who pay off debt and start racking up credit card balances and finding their way back into debt.
I pray that you don’t fall into the trend where people splurge on new stuff when they’re finally out of debt and wind up on a slippery slope.
Don’t hold back on things that will bring joy and events that matter, but don’t forget that overspending is a problem and that you saving money is important for all your life.
If you want to retire early, go on more vacations, or anything else, saving your money now is more important than getting the latest phone and newest, biggest TV.
One of the best financial decisions we have made in our lives was paying off our debt as fast as we could.
It has allowed us the freedom to quit our jobs, work from home, and do more of the things that we love.
“The rich rule over the poor, and the borrower is a slave to the lender.” – Proverbs 22:7
Living in debt should not be the norm! You should not be a slave to your lenders.
Getting out of debt is not easy, but it starts with you saying enough is enough, changing your habits, and taking action.
By using these simple strategies we laid out, you’ll be able to pay off debt much faster than you thought imaginable.
We definitely recommend the debt snowball method and earning more money when you can, so please reconsider balance transfer credit cards and other riskier options to pay off debt.
Check out our Budgeting Binder to start managing your money, and see how simple paying off debt can be!