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Well, we’ve done it. We’re officially debt-free! And now that we’ve successfully achieved this goal, I want to share my favorite debt payoff tips so you can hopefully do the same.
What Inspired Us To Become Debt Free
I guess I’ll start with what (or who) inspired us to become debt free – none other than Dave Ramsey. A while ago, I bought his Total Money Makeover book after hearing lots of people say amazing things about it.
While I don’t necessarily do everything that the book suggests, it did inspire me to become completely debt-free for a few reasons:
- Your money isn’t yours if you owe it to someone else. We love saving money and get a thrill when we meet a new savings goal. But then I realized that the money we’re getting so excited about having saved isn’t even ours if we have a credit card debt, a car loan, student loans, etc.
- We want the freedom to do whatever we want, without feeling tied down to financial obligations. Now obviously, we’re always going to have some financial obligations, i.e. bills, groceries, etc. But I love being able to say “Let’s go on a beach vacation this weekend” without feeling like that’s money we really should have put towards a car loan.
- I don’t like owing anyone anything. That doesn’t really need much further explanation.
- If something were to happen to either of our income sources, I like knowing that we’d still be fine financially because we don’t have huge debt repayments to make.
Those are a few of the reasons that we made the decision to become debt free.
Not All Debt is Bad
This is one area that I actually think differently to Dave Ramsey. Even though we made the decision to become debt free, I don’t think that all debt is bad, and one day we may even be in some sort of debt again (like if we need to borrow some money to put towards a house.)
I think that consumer debt, or debt for things that are consumables and don’t appreciate in value, is generally bad. Examples of this include getting a store credit card to buy a new flat-screen television or taking out a personal loan to go on a vacation.
10 Tips to Become Debt Free as Fast as Possible
Figure Out Your Current Financial Situation
The first thing you’ll want to do is work out your exact financial situation. You might be surprised, for example, at how much money you’re spending on drive-through coffee per year. Things like that really add up and eliminating unnecessary expenses can go a long way towards eliminating debt.
The tool we use to figure out and keep track of our financial situation is Personal Capital. Personal Capital is used by over 1.5 million people and it allows you to get the entire picture of your financial situation. It figures out your net worth and your cash flow, it includes detailed graphs showing you where everything is going and coming from, and allows you to connect your accounts like your mortgage, personal loans, student loans etc so you can get a complete picture. And best of all, it’s completely FREE to use. We love it.
Create a Budget
This really is key to getting out of debt, so if you don’t currently have a budget, I recommend creating one right now.
Budgeting might sound boring or restrictive in the beginning, but once you set everything up and realize how quickly it’ll help you to pay off debt, track your spending and increase your savings, you will quickly become a fan. I actually find that in the long run, having a budget gives you more freedom, rather than less.
Make Extra Money
The first thing that most people think about doing when they’re trying to pay off debt or save more money is to cut their expenses. And while this is generally a good idea because most of us do overspend, I think that finding ways to make extra money is equally, if not more, important.
I can say with 100% honesty that we would not have been able to become debt free anywhere near as quickly if I hadn’t found a way to make extra money from home.
Here are some ways you can make extra money:
- Start a blog. Blogging makes up the largest percentage of my extra income. You can make blogging a hobby to earn a few extra dollars here and there, or you can make a full time income (or even more) from your blog. Not to mention that the skills you’ll learn can often be translated into your current job, even earning you a promotion or payrise. You can start a blog very quickly and cheaply by following my step-by-step tutorial here.
- Teach English online. Teaching English online with VIPKID is a great way to make extra money. I know a lot of people who are making supplemental income teaching with VIPKID, and some people are making a full time income with them. It all depends on how many hours you want to work! I’ve written a full, in-depth post about VIPKID here.
- Join Ibotta. Ibotta is hands-down my favorite cash rebate app. It’s an excellent, super-easy way to make extra money for something that you already do anyway – grocery shopping. Ibotta gives you cash back for hundreds of items at the store, including things you might not expect like fresh produce, milk, bread, etc. Ibotta is free to join and you’ll get a bonus $10 by clicking here and joining.
- Complete online surveys. Online surveys are another easy way to to make some extra money. I like to do online surveys in the evenings when I’m sitting on the couch watching TV with my husband. There are lots of online survey companies but my favorites are:
- Drive With Lyft. Driving for Lyft is something that I’ve always thought seems like a great way to earn extra money. If I didn’t have a toddler at home then it’s definitely something I would do. The amount of money you can earn as a Lyft driver varies depending on how many hours you choose to work and where you live. They have a handy calculator here that lets you input your city and hours and estimates how much you can make. As an example, I entered Nashville and 10 hours a week and it said I could make $200. That’s pretty good! If you click here and apply now, you’ll get a $250 bonus if you complete 100 rides in 30 days.
- Sell Your Old Clothes. If you have any clothes, shoes or purses that you no longer use but are still in good condition, then you can sell them on ThredUp to make extra money.
Related Post: You could also start your own small business or ongoing side hustle to make extra money. It may even turn into a full time job. 50+ Online Jobs and Work-From-Home Business Ideas
Cut Your Expenses
You might think that you already live quite frugally. Or perhaps you know that you need to cut down on your spending. Whatever your situation, it’s a good idea to take a close look at exactly where your money is going.
We found multiple ways we could cut expenses, once we really sat down at took a proper look.
Refinance Your Student Loans
Refinancing your student loans is a big one. So many people have huge student loan debts that they are massively overpaying on due to high interest rates.
LendKey is a student loan refinancing company that can help you save thousands of dollars by refinancing your student loans with rates as low as 2.74%. They have thousands of excellent reviews that you can read here,
It only takes a minute or so to fill out the no-obligation application form where LendKey will tell you exactly what percentage rate you can refinance down to and how much money you’ll save.
Sell Unwanted Items
You probably have tons of unused/unwanted items around your house that you could sell to make extra cash. The saying “one man’s trash is another man’s treasure” is true!
For household items, I recommend holding a big yard sale. We’ve made hundreds of dollars doing this and I actually find yard sales fun 🙂 Check out my tips on how to have a mega-successful yard sale here.
For clothes and shoes, there are two places I recommend checking out:
ThredUp – ThredUp is a good option for selling label clothes. You basically just bag up your items, send them off to ThredUp and they’ll give you a price that they’re willing to pay for the entire bag. Too easy! Check out ThredUp here and get a $10 bonus when you join.
Mercari – If you’d rather sell your clothes individually, then Mercari is another good option. Sometimes I feel like I can get more money for a particular item if I sell it individually rather than bundling it off with other items, so I use Mercari instead of ThredUp. It all depends on the item.
Pay More Than The Minimum
If you’re able to, paying more than the minimum can drastically reduce the amount of interest you pay on your loan and help you pay it off a lot faster.
As an example, our minimum truck repayment was $160/month but by paying $650/month instead, we were able to pay it off SO much faster, saving money in the process.
You can use the extra money you make from the side hustles I listed above, or the money you save from cutting your expenses and put that towards paying extra on your loans.
Eat at Home
The average American family spends more money on dining out than they do on groceries. Restaurants charge INSANE markups on their food. A meal that costs $15 at a restaurant could most likely be made at home for less than $5 (and you don’t have to leave a tip, either!)
Eating more meals at home is an easy way to save money which you can use to pay down debt. I’m not saying you have to stop eating out completely – even trading just one or two restaurant meals for home-cooked can make a big difference.
If you struggle to come up with ideas of what to cook, then I recommend checking out $5 Meal Plan. For just $5 a month they’ll send you weekly menu plans, along with a handy shopping list. All of the meals are family-friendly, easy to make, and usually cost less than $2-$3 per person.
Have an Emergency Fund
It might sound counterintuitive to be saving money BEFORE you start paying down your debt, but it’s not. It’s important to prepare for emergencies or unexpected expenses, and having an emergency fund of at least $1000 will allow to you pay for these types of things without having to use a credit card (and thus, increase your debt!)
Emergency fund savings tips:
- Don’t stop making at least the minimum repayment on your debt just because you’re saving for an emergency fund – that will just increase your debt even more.
- If you have to use some of your emergency fund, start saving immediately to replace it.
Downsizing can be a great way to free up money and pay down debt, fast. We downsized our house by over 50% and it was honestly one of the best decision we ever made. Rent/mortgage repayments are less, utilities are less, you don’t need as much “stuff” to fill the house… the list goes on!
Downsizing doesn’t just have to be about your house though – consider downsizing your car, your possessions, etc. All of these will help reduce your expenses, make/save extra money and pay down debt.
I hope this helps you see that you can become debt-free, it just takes some hard work and determination!
READY TO MAKE SOME EXTRA CASH FROM HOME?