I am currently on a mission to become debt free. I have paid over $8000 in debt off so far. I still have work to do but i have made a lot of progress. The question I have received the most is HOW? Here are some steps I took.
Beginning The Journey
One of the first steps was developing a less frills budget. I created The Savvy Budget Planner to help get my finances in check. Keeping my financial goals as a priority. I could have some splurges but not as much as usual. Some would advise you to cut all wants but if you have a substantial amount of debt you are in it for the long hall and this might not be realistic. I had to decide a percentage of my income that would go solely towards debt repayment.
Next I wanted to take a good look at what debts I had to pay off and what the best debt repayment strategy. I use Undebt.It.
Undebt.It is a program that allows users to manually input all debts balances and choose a repayment plan. This program is really great for individuals who don’t like linking all of their accounts. It will give an estimated debt free date based on the information entered. I use it to analyze different debt repayment strategies. I swear by it. I am so excited to go add my extra payments and see my balances drop. It’s my financial therapy. When I first added my information to the program in March 2018 it estimated I would be debtfree August 2024. Below I have included my current screen… the progress really motivates me to keep attacking my balances.
I know we are working on paying down debt but please don’t forget to add savings in your equation. I use the Savings Planner to help track how close I come to my goal. It’s important to work on an emergency fund during the process. See my post about how to build up your emergency fund. I use Qoins and Qapital to help with savings also.
Qoins and Qapital are savings apps that help boost your savings by automatically withdrawing funds from your account for you. This is helpful because you don’t see the money unless you open the app. I have an emergency fund goal and a regular savings goal. Qoins charges $2.99 a month but will take savings and apply them towards the debt of your choice which is an added feature. Do some research decide which program is best for you.
Building an emergency fund is important to do throughout the debt repayment process. If an emergency arises it will cause the creation of more debt and that will disrupt your process. It’s also the first step in building wealth. Start building good financial habits.
Sometimes the process gets overwhelming as it seems we don’t have any money left to pay off anything. AFTER your budget is created and you don’t see much wiggle room.
- Consider a (temporary) side hustle.
- Sign up for Ebates (get paid to shop)
- Sell old items on Ebay
- Sign up for rewards programs (every little bit counts)
- Pack a lunch for work
- Take a water bottle to limit drink purchases ( your waist will thank you)
- Decipher wants vs needs
- Minimize bills as much as possible. (I let go of cable in 2012 and never looked back)
With extra money that comes in, set aside 70% for debt and 30% for savings. Keep this strategy going to help get balances down.
Make Extra Payments
One of the ways I paid my car loan off a entire year early was by making extra payments. I made biweekly payments so they ended up with extra payment each year. I also made the monthly total more than my standard payment. For example if my car loan payment was $250 I would pay $150 per biweekly paycheck. Most car loans have APR’s which are annual percentage rates but the interest is applied daily. Making extra payments lowers the balance which lowers interest applied to your loan. This helps get the loan paid faster and more money applied to the principal balance. For extra payments please be sure to call your creditor and find out the procedure for making principal only payments. Many creditor have certain procedures you must follow.
Let us know your great tips that you use to pay off debt. I am definitely interested. I know I have become a little creative during my debt free journey.