If you are anything like me, once you realize that you have been treating your finances so badly you will want to find out how to pay off your debt fast.
I don’t blame you!
For many many years, I believed that debt was a normal part of growing up. It was one of those things that everyone had. The only people that could ever escape debt were people who were born into rich families or happen to strike it lucky at some point in their lives.
I know that seems really naive now but at the time it made perfect sense to me. I mean how could you buy the things you loved without credit and going into debt just a little bit.
The thought never occurred to me that you should actually save up before making a purchase or that a little bit of debt could turn into a lot of debt that would also eventually affect your whole family.
I don’t know why I didn’t think more clearly back then.
It’s extremely easy to get yourself into debt and not so easy to get yourself out.
Once you realize that you are on the wrong path you will want to get yourself out of there sharpish!
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Here are 8 tips on how to get out of debt fast:
1. Make a note of all the debts you have
You have to be really honest here.
Make a list of all the debts that you have right now.
A debt occurs each time you borrow money, that could be from the bank, your family or friends. It doesn’t have to have interest attached to it for it to be considered as a debt.
Anything that you owe to someone else is a debt.
Go through your last few bank statements if you have lost track of what you owe and note down every single debt.
By the time you have done this, you will have a much clearer idea of how much you actually owe.
You’ll be surprised but most people can not tell you off the top of their heads how much they owe as a total sum.
If you can work this out you are already one step ahead of the game.
Also seeing that figure on paper will help to motivate you to want to get rid of it. No one wants to look down and see that they owe $50,000.
2. Change your mindset
This is going to be your biggest game changer.
It all starts in the mind and if you want to change your situation in a big way then you must change the way that you think about money.
Money does not equate to debt.
If you want to buy something you have to save up for it. This is pretty hard to get used to so it will take you some time to fully adjust your thinking.
You have to become completely money conscious and be aware each time you swipe your debit card.
You’ll be surprised how many times you whip out your debit card in a day without even thinking about it.
You can’t do that anymore.
Think twice before you decide to make a purchase and weight up the fact that each time you spend money it will take you that much longer to pay off your debt.
3. Consider the cash envelope system
I love the cash envelope system because of how it helps you to see exactly how much money you are spending.
As discussed earlier, it’s easy to pull out a debit card and pay for your purchases when you can’t see the physical cash.
If you are paying for items with cash from an envelope, believe me, you won’t want to part with that money so easily.
Watching that envelope of cash get smaller and smaller will not be fun.
It’s a great way to help you get control of your spending especially if you are an overspender.
4. Make sure you have a working budget
When I talk about budgeting. I prefer to talk about a working budget.
Many people will tell you that they have a budget but after you ask a few more questions it becomes obvious that it is not a working budget after all.
What I mean by this is that they keep their budget in their heads or it never changes monthly or it’s a flexible budget therfore not a real budget.
You MUST (I can not stress this enough) have a working budget that you adjust each month.
Finances change all the time and income and expenses go up as well as down. You need to make sure that you are on top of this.
Your budget is there to make sure all your expenses are covered for the month and that you can make ends meet. If this is not the case then you make adjustments to your budget so that everything does fit.
Your budget is your safety net so its important that you make sure it works well.
If you don’t already have a budget you can use my free one here.
5. Use the debt snowball method
If you really want to discuss how to pay off debt fast then the debt snowball method is going to be your best friend. It’s a great way to pay off debts fast via monthly payments.
It is very similar to debt avalanche but instead of starting with the debt with the highest interest rate you start with the largest debt.
If you’ve never heard of the debt snowball method then you should take a look at this post here.
This method requires lots of hard work and dedication but it is for sure the quickest way to pay off your debts and stay motivated at the same time.
It’s not called debt snowball for nothing that’s for sure!
6. Use a zero-based budget
A zero-based budget is the best way to budget your money.
The really great thing about a zero-based budget is that you have to make sure that every dollar of your money has been accounted for.
Every dollar has a job to do because if you don’t give each dollar a job you will lose it.
If after planning out your budget you see that you have $100 left over at the end of the month, don’t just leave it, do something with it.
You might want to make an additional payment towards your debt or put it towards your family emergency fund. No matter what it is you must do something with that extra money.
7. Cut back on spending
Cutting back on spending is part of your money mindset.
You have to look at money differently now. Its no longer there just for your pleasure as and when you feel like it, no. The money you have is to be used with wisdom.
That means cutting back on the things that you don’t really need.
A good example of this is that full package on cable that you have.
You may not want to completely cancel it but you should definitely consider cutting it back to a much lower package.
Another good place to look when it comes to cutting back on spending is your grocery shop.
People often spend a huge chunk of money here. This can easily be rectified by meal planning.
You can either meal plan yourself if you have the time or use a company like Platejoy.
8. Increase your income
On occasion, you come across the person that is so hell-bent on getting rid of their debt that they are literally willing to sacrifice anything.
If that is you then this one is for you.
Consider increasing your income. This might mean getting a second job or getting rid of some items that you have lying around the house.
Decluttering is a great way to clear some space and make some extra cash at the same time.
Other ways to increase your income are:
1. Proofreading, where you can literally work the hours you want when it is convenient for you to do so
2. Transcribing, another flexible way to make extra money whilst working from home
3. Taking part in surveys like survey junkie.
These are all really great ways to make money in a way that you are not tied to having to commit to extra working days on top of your current job.
Final thoughts on how to pay off debt fast
Yes, you might have got yourself into a pickle with debt but that is not the end of you. Its never too late to start your debt free journey and it certainly is not impossible to pay off your debt fast.
The more you follow the above tips the more your thinking towards money will be transformed.
I know you can do it.