We’ve all been there — bill after bill arriving with your required monthly payment screaming for attention. You debate submitting just the minimum payment and fantasize about shoving the bill in the shredder before squaring your shoulders and paying the full amount due... and promising yourself you’re going to dig yourself out of debt, starting now.
Regardless of the form — credit card debt, student loan debt, personal debt owed to friends or family — debt represents an obligation on your personal finances, and it can create money-related stress and anxiety.
Banks and lenders are all too happy to collect finance charges (and occasional late fees) from those of us with outstanding loans. Research from Citizens Financial Group suggests that 60 percent of student loan borrowers today expect to pay off their loans in their 40s — nearly 20 years after many have earned their degree.
In addition to student loans, home loans are a significant source of debt — according to Freddie Mac, 88 percent of homebuyers finance their purchase with a mortgage, and 90 percent of those use a 30-year mortgage. With the ability to refinance home debt, over a third of homeowners ages 65 to 74 still have mortgage payments, with an average balance of $118,000 according to the Federal Reserve Board.
However, if you’re sick of your debts and are eager to pay them off quickly, there’s hope. Many of us have vanquished the debt monster — and done so with speed — after deciding enough is enough. I’ve spent time combing through articles to explore what others have done to pay off debt quickly, and reflecting on my own experiences with paying off student loan and credit card debt, to help you tackle your debt monster.
Here are 13 things that people who pay off debt quickly have in common:
1. Decide to make debt payoff a priority.
Money is a finite resource, so making the conscious decision to eliminate debt is a critical first step. There will always be money-related temptations, but if you’ve determined that debt payoff is your primary financial goal, it will help you stay focused.
2. Prioritize your debts.
All debts aren’t created equally — stack-rank your debts and decide which to pay off first. This is typically the debt with the highest interest rate (if you don’t know the interest rate, you can call the bank or financial institution for this detail). However, I also consider prioritizing smaller debts (which you can pay off with extra speed) or those with a high emotional cost — like a personal loan from a friend.
3. Make a specific plan.
Being detailed will help you achieve your goal — decide how much extra you’ll put towards your debt, write it down, and do it. Hold yourself accountable — but don’t beat yourself up if you slip. Remember, you can always get back on track tomorrow.
4. Automate extra payments.
Remove the temptation to skip a month, or divert your extra payments to something more immediately gratifying, by scheduling monthly automatic payments from your bank to your lender. When you do this, call your lender to ensure they’ll apply the extra payment to the principal balance of the loan (some lenders will apply extra payments to your next month’s bill, which doesn’t pay your debt down as quickly.)
5. Avoid falling into more debt.
Yup, you read that right. Part of successful debt payoff is tackling what you have and avoiding more loans. If your extra student loan payments make your budget so tight that you’re using your credit cards more often, you’re robbing Petra to pay Paulina, and no better off than you were before.
6. Get creative to find money in the budget.
Keep an eagle eye on your expenses for a few weeks to identify ways that you can shift a few dollars (or more) towards debt payment. You may love your pedicures, but could you do them at home and submit the money you’d typically give your provider to your credit card instead? There are many sneaky ways we spend more than we mean to — find yours to unlock some extra room in your budget.
7. Create a short-term side hustle to boost income.
Side hustles can be fabulous, particularly if you pick something like babysitting, dog walking, or handywoman services that earn a reasonable rate and put cash in your pocket quickly. Similarly, you may opt to apply your professional skills to provide social media services, website design support, editing or clerical work, which can also be a great way to both grow your network and line your pockets. Apply your side hustle payments directly to your debt to make fast progress.
8. Take a snowball approach.
When you pay off your debt (and I know you will, boss) - use the “snowball” technique to continue your progress. Snowballing refers to applying the amount you used to pay to your now-paid-off debt towards the next debt on your list. For example, if you just paid off a $250 credit card payment, apply that freed-up $250 towards your next loan on the list — say, your student loan — paying extra until that is eliminated. Rinse and repeat until you’re paid off... after which time you should start to think very seriously about investing to build wealth, if you aren’t already.
9. Share debt payoff goals with a friend.
People that share their goals with an accountability buddy are more likely to achieve them. Start talking about your money-related goals with your girlfriends, and make regular accountability appointments (cocktails optional) to ensure you remain on track...or strategize if you’ve lost your way a bit.
10. Track debt payoff progress.
When you start paying off debt, it may feel overwhelming. But tracking your progress over time (on paper, on your phone, with nerdy graphs and spreadsheets like yours truly) can give you perspective and help you visualize as you chip away at your obligations.
11. Celebrate progress.
While your ultimate goal might be debt-elimination, milestones along the way (paying off 25 percent of your debt, your $500 credit card bill, or getting your student loan down to five figures) should be celebrated!
12. Follow more money-related gurus.
Maintaining motivation while you pay off debt can be challenging. I find that keeping positive, financially-savvy messages in my life helps me keep my eyes on the prize. Some of my favorite gurus include Jean Chatzky, who has a great podcast centered on women and money, Farnoosh Torabi, who has incredible resources on her site, and Deborah Owens, who brings a very pragmatic approach to money.
13. Keep gratification in your life.
On the path to debt payoff, if you give up every single little luxury, you risk feeling deprived...which can trigger you to spend more. While you’re actively paying off debt, allow yourself the things you value most (perhaps in a bit more moderation), as long as you can continue to make progress towards your goals.
People that pay debt off quickly have these techniques in common - and you’re not alone as you attempt to make progress. In 2017, the New York Federal Reserve released a report showing that U.S. household debt totaled $12.73 trillion (yes, with a “t”). This is more than the pre-financial crisis 2008 peak of $12.68 trillion.
Similarly, NerdWallet research found that Americans’ credit card debt grew in 2017, with the average household with credit card debt reached $15,654. Credit may be more accessible today, and interest rates near-record lows, but if you hate debt as much as I do, I hope you apply some of the techniques above to vanquish your loans.
Living totally debt free isn't always easy. But if you at least make your minimum payment on your credit card balance, if not your entire monthly payment each due date, to avoid a high interest rate, you can keep from hurting your credit score and having a debt collector from a collection agency come after you. Fortunately, there are options for debt consolidation and you can make a replayment plan with a personal finance professional who can help keep you from abusing credit cards.
You need your credit score to look good to purchase homes and cars and make other big payments, so it's important to make a debt repayment or debt management plan that works for you. Besides, it'd be nice to have a little extra money once you're done paying off your student loan debt, for example. You won't have to dip into your emergency fund for a non-emergency anymore!
Are there other techniques you’re using? What has helped you slay your debt quickly? I’d love to hear from you!
The Feminist Financier is on a mission to help women build wealth and own their financial independence, by improving financial literacy and taking the mystery out of money. Ms. Financier is also a shoe addict, travel fanatic, and wine enthusiast.