I hate debt. Hate is a strong word, but it is true. I really do hate debt. It can destroy lives and it can break-up families. To this day, I am baffled by the fact that the average American has $137,063 in debt. $137,063! Unbelievable!
I am sure some of you are rolling your eyes about now, trying to come up with counter arguments, etc, etc. Hear me out. I know that debt can provide leverage. I know that people can use it to actually change their lives for the better. The fact of the matter is, most people DO NOT DO THIS. Instead, they use debt to live beyond their means, live like a rockstar, and simply live to impress.
This article is for those people. Not those who use debt to buy investment properties, trade using margin, or even attend college (although I am not a fan of student debt by any means). For those of you that use debt to live beyond your means, you need to continue reading. It is likely that your mound of debt is hurting you financially, and it is likely that it is hurting you emotionally. Your life does not need to be controlled and manipulated by debt. So, let’s start a journey towards debt freedom, shall we?
These are the steps I used to pay off my credit card debt and two car loans several years ago. The combined amount of debt I had at the time was around $20,000. I did this on a relatively low annual income, and I did so quickly when I realized it had to be done. It took me 1.5 years, and I have been debt free ever since. Here are my 7 tips to get out of debt fast even when you are broke:
1. Create a Debt Payment Plan
If you are going to destroy your mound of debt, you NEED a debt payment plan. A debt payment plan will get you on the right track, and it will help you stick to your payments. Here are the steps to make one:
- Write down all of your debts
- Prioritize those that are large and have a high interest rate
- Identify how much you can afford to pay towards your debts every month
- Start paying
Creating a debt payment plan is that simple. If you want to fiddle around with the numbers, check out my debt calculator in the resources section! Creating a debt payment plan is a very important step in your debt freedom journey.
2. Pay Your Debt First
This is similar to paying yourself first. Instead of putting money into your savings or investment accounts first every time you are paid, you put the money towards your debts. Some of you may disagree with this, but this can be a powerful way to pay off debt quickly. Think of it this way, once your debts are paid off, you will have more money to save and invest. You will also save money in the long run because you will not be making interest payments.
3. Reduce Your Expenses
Reducing your expenses will allow you to put more of your income towards paying off your debts. For example, let’s say you pay $40 a month for a gym membership. If you cancel the membership, you will save $480 a year. You can put that $480 a year towards paying off your debt, and you can stay fit by working out at home. Reducing expenses is a very important step in the debt payment process.
4. Start Hustling
No, I do not mean start scamming people. I mean that you should consider trying to develop a side hustle. A side hustle is a way to make money outside of your full time job. For example, I tend to flip items, build websites, and I even taught guitar at one point. Side hustles can be a fantastic way to increase your income. With an increased income, you can quickly pay off your debts. You may even want to consider putting all of the income earned from your side hustles towards paying off your debts!
5. Stop Using Your Credit Cards
In order to reduce your debt, you need to stop accumulating debt. Freeze your credit cards and stop using them. They are not going to help you achieve freedom from debt. Once you pay off all of your debt, you can start using them again. Do so sparingly though. It would be a tragedy to pay off all of your debt just to accumulate it again.
6. Get Serious About Budgeting
Budgeting will allow you to identify how much you can afford to pay towards your debts per month, how much you spend on unneeded expenses, and it will allow you to take control of your financial habits. Budgeting is simply a must for those looking to reduce their mound of debt, and it is even more important for those looking to achieve financial independence. For a more in depth look at budgeting, check out my article here. I have even created a spreadsheet for you to use if you do not wish to make your own budget.
7. Automate Your Payments
Automating your payments can make your debt payment process seamless. Automation is a valuable resource, and it can really help you throughout the debt payment process. Automation can also be used to pay your debt first. Only automate your payments when you identify how much you can afford though! You also need to keep an eye on your accounts to make sure they aren’t overdrawn due to an automatic payment. If you decide to automate your payments, try to pick a date around the time you get paid.
So what did you think of my tips to get out of debt fast even while you are broke? I hope these tools and tips help you achieve debt freedom! Having no debt is an amazing feeling. Do you have any additional tips to share? If so, comment your ideas below! Feel free to ask questions as well. Good luck! Cheers!