Are you trying to figure out how to pay off debt?
Debt, of any kind, can be crushing and ultimately hinder your financial goals and aspirations. I’m no stranger to this, having had over $78,000 in student loan debt after graduation.
I had no clue how to begin paying off my debt but I knew that it was necessary for me to live that life that I wanted.
I dreamt of being able to travel the world and ultimately staying home with my family. None of that would be possible with so much debt taking up my income.
I found myself doing exactly what you’re doing right now. I searched the internet and books for answers and, ultimately, was able to find exactly what I needed to start my debt-free journey.
It’s been nearly four years since my husband and I paid off our debt (really my debt). And though I haven’t come home from corporate America yet, we have been financially free to travel the world.
There are so many factors that go into being able to pay off debt, but in this post, I’ll share the six basic steps that anyone can take to get out of debt.
6 Essentials Steps to Pay off Debt Quickly
1. Shift your money mindset
You probably didn’t expect this to be the first step in how to pay off debt quickly. But without addressing your mindset first, nothing else will matter.
Mindset is the nucleus of success, including within personal finances. If you have limiting beliefs around money, you won’t be able to accomplish the financial aspirations that you have for yourself and your family.
Whether you came from a home that talked about money, struggled with money, or even if you grew up in affluence, it all shapes how you view and handle money as an adult.
Many of us weren’t taught money management—hence us continuing the cycles of debt in our family. Regardless of what you were or weren’t taught, though, you have the ability to shift your mindset, turn a new page, and change your narrative around money and debt.
So how do you shift your money mindset?
The first step is believing that you can actually get out of debt.
I know that this can be hard, especially if you have a large amount and a smaller income in comparison.
I never said that it would be easy, but it is certainly possible. So many before you have done it and so can you!
To help shift my own money mindset while paying off debt, I came up with a mantra. Every day, I spoke, read, and thought, “Debt free before 30.”
Saying this over and over again and putting it at the forefront of my mind allowed me to come up with the necessary ideas and willpower to do the work to make it a reality.
In my book, Dump Debt & Build Bank: The Everyday Chick’s Guide to Money, I share 25 affirmations that I still make today that continue to help shift my money mindset.
If you struggle with your money mindset, I dedicate a whole chapter to transforming your thoughts from those of lack and doubt to prosperity and belief.
2. Calculate how much you owe
Now the math comes in.
If you haven’t addressed your money mindset, then this step can actually be a challenge. That’s because many people fear what they will see when all the numbers are run.
Regardless, you can’t fix what you don’t face, so add ‘em up!
Knowing exactly how much you owe and to whom you owe it is the starting point—the line in the sand—for your debt pay-off journey.
To find out how much you owe, you can simply call all of your lenders to get a current balance. Or, in most cases, you should be able to log into your payment portal to get a total cost.
The point here is to just know exactly how much you owe everyone so that you can begin creating a plan to pay them off.
Think of this step as the equivalent of a weigh-in just before a diet. You have to know what you owe to get where you want to go!
In my book, I share a free tracker that you can use to list all of your debts.
3. Stop creating more debt
This should go without saying, but if you want to get out of debt, you have to stop creating it.
Getting into more debt while you’re trying to get out of debt counteracts your efforts. Think of it like eating a slice of cake after an intense workout.
It just doesn’t make sense.
This could mean cutting the credit card and not getting a new one, not getting back into debt to go back to school, or simply keeping the car you have instead of financing another one.
Whatever your debt vice is, you have to put a stop to it.
While getting out of student loan debt, I owned a credit card. Although I never carried a balance, having it was counterproductive to my overall goal of becoming completely debt-free.
So, I cut the card and canceled the account.
You have to commit to your debt-free journey by removing the option of getting back into debt.
4. Create a budget
“Budget” can sound like such a restrictive word, so if you like, you can call it a spending plan.
Either way, you need to have a plan for where your money is going. Furthermore, you have to have a plan to direct it toward paying off debt.
A zero-based budget simply means that at the end of the month or pay period, your income minus your expenses equals $0.
Now, this doesn’t mean that you actually spend all of your money. Instead, it means that you’ve assigned a place for every dollar that comes into your account. This could be expenses, savings, or even debt repayment.
Regardless of what budgeting method you choose, the concept is the same.
- List your income
- List your expenses
- Compare your expenses to income
- Adjust your expense allocations where necessary
- Track your spending
Below is an example of what a zero-based budget looks like.
Once you have your budget nailed down, you can begin looking for ways to free up cash to put toward debt.
5. Create a debt repayment plan
There are two different debt payoff methods that are most commonly used. That’s the debt avalanche and debt snowball.
The debt avalanche suggests that you pay your debts off from the highest interest rate to the smallest.
Whereas the debt snowball recommends paying off your debt from smallest balance to largest.
These are just suggestions on the order in which you should pay off your debt, not a magic formula. In the book, I walk through exactly how each works and why I prefer one over the other.
With either method, you want to put extra funds toward debt in order to get rid of it as soon as possible.
Creating a budget will allow you to see where you’re spending wastefully and can cut back to free up cash.
6. Increase your income & make extra payments
A part of your debt repayment plan should be to reduce your spending so that you can free up cash to put toward debt.
Reducing your spending is the quickest way to see an immediate increase in your income.
Somethings that you can do to reduce your spending include:
- Canceling subscription services
- Canceling cable
- Reducing dining out
- Cutting unnecessary shopping
Once you’ve exhausted everything that you can cut back, the next step is figuring out ways to increase your income.
The fact of the matter is that if you have more money, you can put more toward debt. That’s just simple math.
While working to get out of debt, I did things like sell household items and unused clothes. I also used any additional income from bonuses and tax refunds to put toward debt.
Increasing your income isn’t just limited to these things though.
It could mean negotiating a raise or taking on a higher paying job.
This is also the perfect opportunity to start finding ways to make money online.
The great thing is that you have this entire website as a resource for ways that you can make money from home, whether part-time or full-time.
As you increase your income, you’ll be able to make extra payments toward your debt and reduce the time that it’ll take to pay it off.
Final Thoughts: How to Pay off Debt Fast
Paying off debt is hard. It takes time and work, but you can do it.
Everyone’s journey is different, so don’t waste your time comparing yours to the next person.
Know that it’s possible, create a plan, and do the work.
I have a whole road map outlined for you in my book, Dump Debt & Build Bank: The Everyday Chick’s Guide to Money.
I’d love to help you on your journey.