Figuring out how to pay off debt fast is incredibly difficult. The prospects of climbing out of debt could be overwhelming for a lot of people, particularly when the debt is high relative to your income. The good news is there are strategies that can make the task much more manageable.
Before we dive in, I think it’s important to take a moment to acknowledge the reality of the modern world we live in. Everything is expensive, from food to housing and every other expense necessary just to survive. And if you want to actually live a little, you know go out and have some fun from time to time in whatever interests you have, well that’s likely expensive too. No matter how old you are, every aspect of life is exponentially more expensive than the prior generation.
Unfortunately, the surging costs of every day life make it increasingly difficult to not only stay out of debt, but to climb out once you’ve already found yourself over your head. It’s incredibly frustrating, making it important to avoid mental traps like a scarcity mindset . Maintain an appropriate outlook toward money.
The answer to how to pay off debt fast is splitting the process into easy steps
#1 Put the Shovel Down.
The first step is the easiest, and it’s something that you can do right away. Put the shovel down. The best thing you can do when you’ve found yourself deep in a hole that you must figure out how to climb out of, is put the shovel down and not dig yourself any deeper. So if you’re deep in debt, the very first thing to do is to stop utilizing debt in any form.
The first step toward paying off debt fast is putting the shovel down.
This means no more credit card purchases. Don’t finance that new car that you’ve had your eye on. Those buy now pay later platforms like Affirm will have to be avoided. No, you can’t buy that new laptop you’ve convinced yourself you need and Pay Apple back “interest free” over the course of 6 months. To put it simply, do not spend money that you don’t have.
#2 Cut Back on Non-Essential Spending.
Okay, that first step is down. You’ve cut up those credit cards and committed to not getting any deeper into debt. Awesome. The second step is to scale back on all unnecessary spending. Now, this might sound pretty straight forward, but what I might consider ‘necessary’ could be completely different to you. So, to set the proper baseline, we will consider anything necessary to live and function day to day as necessary. That means food, shelter, transportation to work, utilities, etc. That $9 iced latte holiday honey caramel macchiato with extra cream doesn’t count. Neither does that Uber Eats order when you can instead cook a meal for much less money at home.
The second step toward paying off debt fast is cutting back on non-essential spending.
You’d be surprised just how much money you can unlock by taking a more mindful approach toward your spending. You can unlock hundreds of dollars per month simply making your morning coffee at home and bringing lunch with you instead of eating out while you’re on the go during the day at work or school. Cooking dinner at night instead of eating out or ordering in would save you even more. For some, this alone could be a complete game changer for their finances.
#3 Make an Effective Monthly Budget.
The third step is creating a monthly budget. This step is admittedly incredibly difficult for most people. Life doesn’t slow down and let you catch up. In fact, financial emergencies tend to pile on all at once. For this reason, some trial and error is needed here, and also a whole lot of grace for yourself. I’ve written an article that will help you take the first step in creating an effective monthly budget strategy.
#4 Review Your Credit Report
The fourth step is where we really start to examine your debt. To do so, you have to pull your credit report. This step is critical. All your outstanding debt will be in your credit report, even that 6 year old phone bill that you forgot about.
Psychologically, this step is tough. It can feel like not believing you’re sick, no matter how you feel and what symptoms you have, until you go see the actual doctor and get that diagnosis. Somehow, the sickness doesn’t feel real. Well, pulling your credit report is a lot like finally going to the doctor and getting that proper diagnosis. But you must do it, there’s no way around it. Just know that you’ve got this, and you’re not alone. We’re right here with you at Better Money Club.
#5 Attack Debt With All Available Money
The fifth step is without a doubt the toughest. Now that you’ve got your diagnosis, it’s time to pinch your nose and take your medicine so you can feel better. That means attacking your debt with all available funds. But this step can be tricky, with extreme consequences in some situations if done incorrectly. Be sure to check out our article that gives what I think is the best strategy toward prioritizing debt repayment.
In short, here at the Better Money Club recommend you make minimum payments on all debt to keep it current. With any excess money in your budget, prioritize paying off the most consequential debt first (like the IRS or a HELOC). Then transition your focus toward knocking out debt from the highest interest down to the lowest. Collections should be saved for last.
There is a chance that your debts could exceed your ability to cover the minimum payments. This is normally the case if debt is spread across multiple sources. If you’re in this situation, we recommend you prioritize those high consequence debts above all else. Uncle Sam and the IRS should always get their money. Don’t be afraid to pull in extra shifts at work, if possible, or sell expensive vehicles or other valuable luxury items to free up extra cash.
No matter your amount of debt, if you approach your debt with these steps, you’ll knock it out as quickly as possible for you. Just remember, you’ve got this. Hold your head up high and attack that debt with a vengeance. We’re here to help at the Better Money Club.
