Preparedness blog

6 Ways to Pay Off Your Debt

By Lexi from Ready Store
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If you are carrying a large amount of debt, it can feel hopeless and seem impossible to get yourself out of the situation. Debt can be very limiting and controlling, and your life can be lived much more freely when you don’t have that hanging over your head. However, there are steps you can take to start paying off what you owe and becoming debt-free.

1. Make a List
When taking on the task of tackling your debt, the best place to start is by making a list of all the debts you owe to whom, and for what amount. You can organize the largest amount going down or smallest amount going up. Total up the cost so it is easy to see how much you owe and where. Having it all laid out in front of you will make the task of paying off your debt seem less daunting. It may seem inconsequential, but having a physical list and being able to cross debts off the list as you pay them off will give you the momentum you need to keep going.

2. Track Payments on a Calendar
After you have made a list of all of your debt, lay out your payments on a calendar. This can also include deposits into your account like paychecks. Write down when each bill is due and the typical amount of each bill to see how much money is going in and out of your account each month. This will help you manage your money and help you to make your payments on time. And if you know where your money is and where it needs to go, it won’t seem as impossible to handle.

Knowing how much you spend on a typical payment each month can also help you set up a budget. Plan out how much money to typically spend on certain expenses and stick to that number. The less you spend in a certain expense category, the better. The extra money can go towards your debt.

3. Determine Your Goal
Once you know the amount you owe and how much money is flowing in and out of your account during the month, you can set a goal for yourself of when you want to pay off your debt. Determine a reasonable length of time that you can pay off your debt within, depending on your income and the total cost you need to pay back.

Write this goal down, including your total debt and the number of months you are going to take to pay it back. This can be anywhere from 18 months to 5 years. Physically writing down your goal will make it more solid and help you stick to your budget and your plan to pay it off.

4. Save Up Little by Little
Your debt is not going to disappear overnight and it won’t be something that you can tackle over the space of a few weeks. Understand and accept that it may take a while to pay back your debt depending on how much you owe.

One thing you can do is look at your finances and begin to save money. And easy way to do this is by looking at each item in your budget and decide to spend $10 to $20 less in each category. This amount is small enough that you won’t really notice that it’s missing. All of these savings should go directly to paying off your debt.

Saving money in these areas can include things like not going out to eat as often, not financing new furniture, or canceling services that you may not use as often, such as a gym membership or an online subscription. You can also look for ways to increase your income by making more sales if you are on commission or taking in a second job whose income is dedicated to paying off your debt. The more committed you are, the easier it will be to spend less in these areas and make your debt smaller and smaller.

5. Use Cash
Many people fall into debt because of excessive spending with a credit card because it feels like you’re not spending real money. When you decide to pay off your debt, stop using a credit card or debit card and switch to using cash. The use of physical cash helps reduce impulse buys because you give more value to tangible money rather than money on a credit card that you can’t physically see. Using cash will help you stick to your budget and make impulse shopping or unessential items less of a temptation.

6. Seek Advice
If you have done everything you can do and still feel that you cannot do it yourself, seek financial advice from a professional. You may be able to reduce the interest rates of some of your debts, especially as you begin to improve your credit by paying your bills on time and consistently. Once your journey to being debt-free begins, you’ll need to closely track your cash flow and make sure that you are always on track towards your goal.

The hardest part of paying off your debt is actually starting to pay off your debt. Debt is not forever. All you need to do is start by making a plan, setting a goal, and sticking to your budget. Little by little the amount you owe will grow smaller and smaller as you pay off one debt after another. It may take some time, but if you’re determined and willing, you’ll be able to be free of your debt.

4 years ago
5 years ago at 4:27 AM
Another thing to add to the bottom of your budget is a list of those quarterly or annual expenses. Those become "unexpected" because we forget about them. Write what month they are due and how much it typically is so you can include them in that particular month. Keep this list at the bottom of EVERY month so you remember to review it and add those "unexpected" expenses in. It may take a year to figure out what all these are but you'll have a complete list by then. For folks on a tight budget here's a tip: those annual or quarterly expenses, make a line item on each month of your budget for these expenses. Divide each amount that will be due by 12 and add that to each month of your budget. That amount will be calculated into your what you can spend each month. When that annual or quarterly bill comes due you will have "set aside" the money for it by deducting all those prior months. You have to time this the right way though! A quarterly bill needs 3 months in your budget before you have fully funded it. Paying those "unexpected" expenses this way is so much easier. An annual $1000 bill is only $80 a month.....that's more manageable.
Greg Arnsberger
5 years ago at 7:17 PM
Check out Dave Ramsey and his Financial University...
cynthia cully owen
4 years ago at 9:03 AM
the main thing in paying off debt is to START is like tithing to a church....if you dont have the free cash...then start small. you will find that it is easy to increase, just dont look back after you start.