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Paying off debt is not exactly an easy task. And staying out of debt is even harder (especially if you’re an emotional spender or addicted to swiping credit cards).
Those who have become debt free and stayed out of debt have one thing in common. They changed their behaviors and created new, healthy habits to keep their spending in check.
Here are 7 ways you can adjust your lifestyle to pay off debt fast…once and for all.
Quick Tip:
If you’re looking for a way to keep track of your personal finances, I’m using (and highly recommend) the Happy Planner with debt payoff tracker inserts you can check out here.
I’m launching the Better Budget Blueprint course this week, and I’ll be teaching how to build a better budget in just 24 hours. I’m recording budgeting modules now, so stay tuned!
In the meantime, you can grab a copy of my budget categories cheat sheet. Then I can drop you a line as soon as the course is ready!
1. Learn How to Budget by Paycheck
It should come as no surprise that people who’ve paid off debt fast became obsessed with tracking their income and expenses.
There are a few who don’t believe in budgeting. They spend what they spend and they stay in the same cycle of paycheck to paycheck and broke as hell.
I want to warn you against budgeting on a monthly spread. The fact is most people aren’t paid monthly. They are paid semi-monthly, no-weekly, or weekly.
And then there are bloggers and other entrepreneurs who are paid irregularly. I receive random payments throughout the month.
For example, on the 2nd of every month, I’m paid by one of my affiliates. On the 3rd, I receive my Mediavine ad revenue income, and YouTube pays me on the 21st.
But there are many days sprinkled throughout the month where I am paid affiliate income or sponsored revenue.
Related Content to Blogging as a Side Hustle:
- How to Start a Blog
- 5 Things You Need to Know Before Launching a Blog in 2020
- How I Earned $30,000 Blogging in 2019 (vs $1,500 in 2018)
[ss_click_to_tweet tweet=”It is especially vital to track irregular income because I have to tell my money where to go. It puts me in control (instead of the other way around).” content=”It is especially vital to track irregular income because I have to tell my money where to go. It puts me in control (instead of the other way around).” style=”3″]
Budget by Paycheck Method Explained
Budgeting by paycheck is putting pen to paper and planning your spending every single time you receive income.
For many years I used a simple family finance organizer but recently switched to the Happy Planner because I’m able to track daily income and spending.
It’s great for functional planning but you can also decorate it with washi tape and mildliners if you’re the creative type.
2. Set Realistic Debt Payoff Goals
If your take-home pay is $3,000 per month, and you owe $30,000 on credit cards, auto loans, and student loans, you’re not going to be able to pay it all off in a year.
I’m sorry to be the one to break it to you, but you can’t live off of $6,000, devoting $30k to your debt snowball.
You have to be reasonable and realistic. People who have become debt-free did so by setting SMART goals.
SMART goals are:
S – Specific
M – Measurable
A – Attainable
R – Relevant
T – Time-Bound
3. Don’t Make Emotional Purchases
People who’ve gone before us and paid off their debt completely have learned to keep their emotional spending in check.
They have learned what triggers them to want to spend money on themselves, and they have put safeguards in place to keep from overspending.
Some precautions you can take if you’re an emotional spender include:
- Deleting your debit and credit cards from saved cards on your computer and phone.
- Only carrying a specified, budgeted amount of cash every day so you are sure to stay on budget.
- Frequently checking in with their spouse and talking about how they’re feeling. If you’re the type of person who hides purchases from your spouse, this is your wake-up call!
4. Side Hustle or Pick Up Extra Work
If you’ve ever listened to Dave Ramsey’s debt-free screams, a commonality between many of the people who’ve paid off debt fast was that they became gazelle intense.
Gazelle intensity isn’t just practicing extreme frugal living, though. Many of these people picked up second and third jobs and started businesses to make extra money on the side.
If you’re looking to make extra money to put towards your debt, check out this post with 76 different ways to make extra money. I share everything from donating blood plasma to working “Dave jobs” and starting a blog in 2020.
5. Pay Off Debt Fast with the Snowball or Avalanche
We’ve all heard of the debt snowball method, which is listing your debts in order of smallest balance to largest balance and paying minimum payments on everything except the smallest balance, knocking them out one by one.
[ss_click_to_tweet tweet=”But it isn’t always the best method for paying off debt fast. Let me say that again. The debt snowball isn’t the magic pill for your money problems.” content=”But it isn’t always the best method for paying off debt fast. Let me say that again. The debt snowball isn’t the magic pill for your money problems.” style=”4″]
It can cost you thousands of dollars if you aren’t careful.
Let me explain. Let’s say you opened a credit card with a promotional rate of 0% for 12 months, and you racked up a $7,000 balance but didn’t pay it off.
Now your minimum payment of $70 per month just increased to $215.83 and you’re paying the $70 minimum payment plus $145.83 in interest every single month.
How does this happen? Well, the interest rate on this credit card happens to be 25% APY, so if your minimum payment is 1% of the outstanding balance plus interest, here’s how it works:
$7,000 * .25 (25%) = $1,750 (annual interest)
$1,750/12 = $145.83 monthly interest payments PLUS the minimum payment of $70.
Do you see how you’d want to take care of this before other payments (regardless of balance)?
The method of paying off balances with the highest interest rate down to the lowest rate is called the debt avalanche method.
Each person or family’s financial situation is different, so you have to determine what will work best for you.
I personally use a combination of both methods to pay off my debt because I need the quick wins that come as a result of using the debt snowball, and the avalanche saves us money on interest.
The most important takeaway is that people who pay off debt fast are just like us. They were also once in a position of overspending, seeking instant gratification, addicted to new cars, etc.
We can all learn from the positive habits of successful people who’ve learned how to get rid of debt quickly.
Give some of these positive habits a try and see if you’re able to get jumpstart your financial resolutions for 2020 and beyond!
