Working in the finance industry can be a real eye opener. The knowledge that has truly stuck with me has been more due to the experiences and interactions that I had with everyday people like you and I.
My clients were the ones that I learned most from. It’s actually rather incredible now that I think about it, how much I learned from monitoring and handling people’s finances. I got to see how people managed their money, what savvy investment moves they made, and the mistakes that they made a long the way as well. My role was to help them minimize mistakes as much I could. There was one red area that always stood out to me…
Debt was a common denominator in scenarios where clients were having financial trouble. The main reason was because they could not even feel their income. If that makes sense.
As Dave Ramsey says: “your income is your most valuable wealth building tool.”
With that being said, if you are paying bills upon bills each month, particularly on debt, (car payments, loans, credit cards, lines of credit) chances are that most of your income could be flying out of your bank account much quicker than you realize.
Needless to say, eliminating unnecessary debt is something that can make all the difference in your financial picture and your financial confidence.
Here Are 10 Ways You Can Eliminate Your Debt Faster Than You Think
Change Your Habits
If you truly are ready to eliminate your debt and have made the commitment, this is where you are going to want to start. The truth. Your truth.
If you have debt, it is because you either had an emergency and had no other choice, or you allowed for it to accumulate. We should always be willing to take accountability for that. This is where true change and growth happens.
By looking at our financial habits, we can learn a lot. We can see where we are excelling, and where we need to plug some holes. We get to identify how much we are spending, why we are spending, and then use that information to create a plan. The plan is to change habits, create a budget, pay off debt, and never go back.
Create A Budget & Stick With It
Everyone should have a budget for themselves and for their household. If you are not willing to create a budget for yourself, you are choosing to run your finances blindly.
Consequently, this leads to a recipe for financial disaster. If you stop to think about how often you work, and how much time you trade to make money, you should realize that managing your money properly should be on your priority list.
If your main goal is to try to get out of debt as quickly as possible, you will need to start with a plan. A detailed one at that.
You are going to want to create a budget, and stick with that budget to the penny. A detailed and organized budget plan is going to help you maximize your income, and leverage that income towards helping you to pay off your debt as quickly as possible.
Use The Snowball Method If You Have Multiple Balances
An effective way to pay down debt quicker is to use the snowball method. This method is simple and effective. I have used it many times with my clients, and I have seen some great results firsthand.
The snowball method, essentially, is paying the smallest debt first, while sending minimum payments to all of your other debts on their respective due dates.
Once you pay off the smallest balance, you now move onto the second smallest. Except now, you have one less monthly payment. This one less monthly payment, now allots you more cash flow to pay the second smallest payment.
After the second smallest payment is paid, you then move onto the next debt. With a payment snowball that is increasing with momentum and size, each debt gets paid off faster.
You keep this method going, and it will help you pay your debts off faster than you think.
You just need to believe and then execute.
Pay More Than The Minimum Payment Due
Turns out that a lot of people don’t truly understand how the lending system works. You are approved for a loan or a credit line, and in exchange for using those services, you are charged an interest rate percentage.
For example: At the time of writing this, the average credit card interest rate is 18.24% .
Credit cards carry an extremely high interest rate attached to them. That same interest rate, is calculated into your monthly payment.
If you are sending the minimum payment due, which reflects on your statement, you are going to take forever to pay that debt off.
With an average interest rate of nearly 20% (to keep things simpler), a $100.00 payment, now becomes $80.00 This means $20.00 dollars are taken right off the top and straight into the banks pocket.
Factor that same $80.00 payment each month, against a credit card debt of $5,000 and you can see how you are going to be making monthly payments for quite a long time before you pay that debt down. It often seems like the balance never moves.
Using this same example above, what you want to do instead, is send an extra $20.00, in addition to the minimum payment due. This is going to help cover the interest portion of your payment, and it is going to leave a higher amount going directly to principal (total debt owed, minus interest), helping you pay down your balances much quicker.
Take Advantage Of Balance Transfers
Taking advantage of balance transfers is a savvy way of paying down credit card balances, and possibly some personal loans (check with your credit card provider). Not everyone is aware of this tactic, therefore, I thought I would touch on it.
Let’s create a quick example:
- Jane, owes $3,000 on credit card #1 — credit card #1 is currently charging Jane 19% interest rate on her balance.
- Jane has a second credit card (credit card #2) with a $5,000 limit. This credit card #2, is currently paid down (a zero balance). Credit card #2 is offering a “promotional balance transfer offer.” The offer is for 18 months 0% interest.
If you look at the scenarios, and have some experience within your finances, you probably see where I am going with this already. If not, hang tight.
- Jane can call credit card #2 and let them know that she would like to take advantage of the promotional offer. She would like to transfer her balance over from credit card #1, over to credit card #2. This will allow Jane to pay that balance down for the next 18 months at 0% interest!
Taking advantage of offers like these can help you pay your debt down as quickly as possible.
** On balance transfers, there is usually a one time fee that is associated with that balance transfer option. Make sure to clarify upfront what that fee is.**
Put A Stop To Your Credit Card Spending
If you have credit card debt, you probably shouldn’t be spending on your credit card anymore. I worked with many clients who were trying to pay down their credit card debt, but they were still using it here and there, to make purchases. If this sounds like you, then you should put a stop to your credit card spending completely when paying down debt.
A better approach, is to switch over to cash payments, or debit card payments. This way, the money will be deducted directly from your bank account and you feel it. Studies have shown that utilizing a credit card, one does not “feel” the hit like they do with a cash transaction. With cash in the hand, it is a lot easier to hold onto. With the swipe of a credit card, your brain registers this transaction differently.
If your true goal is to eliminate your debts as quickly as possible, you are going to want to put your credit cards away. As you pay down each one to a zero balance, do not go back to using them until you have 100% paid off your debts.
Put Work Bonuses And Commission Checks Towards Debt
My wife and I have had some great personal accomplishments when it comes to paying off debt. I have helped my clients achieve the same. One way we did this, was utilizing all of our work bonuses to pay down debt.
A lot of my clients would see this money as “extra”, and they would use this money to enjoy themselves. However, if you want to speed up the process on paying off your debt, throwing every possible penny at your debt is the only way to achieve this. This requires sacrifice.
Utilizing your work bonuses and commission checks to pay off debt is an effective strategy. Typically work bonuses and commission checks can be a substantial amount of money. Some people receive consistent bonuses due to their line of work. If you have any kind of debt that is accruing interest, you should be throwing your work bonuses and commission checks towards it.
Going back to creating a budget, using your monthly bonuses, or commission checks, can be an enormous help. It’s really a great way to pay off debt rather quickly.
Unlink Credit Cards From Online Stores And Monthly Subscriptions
Today we have so many monthly subscription offers and commitments. Some of my clients would be getting charged on a recurring basis, and the scary part was, they wouldn’t even be aware of it. Subscription models can be some tricky little suckers that eat cash.
I have seen subscription services overdraft accounts quite frequently. I have also seen those same subscriptions drain clients out of thousands of dollars over time. If you are looking to pay off your debts, a great tactic is to grab your last 90 days of credit card and bank statements, and carefully comb through them.
By temporarily, or permanently, cutting off these subscriptions, you free up more money that can be readily available now, to pass over to your outstanding debts. This results in paying those things down quicker, so you won’t have to worry about it anymore.
Sell Unwanted Gifts & Household Items Online
For those who are willing to learn, or already know how to sell unwanted items and gifts online, then this is an extremely helpful option that can really help you pay off your debt as quickly as possible.
Take a few minutes to walk your home and look for items you own that you do not have use for, or space for anymore. Then do some research online, see if any of those things can make you some extra cash. That extra cash can then be used to pay off your debt a little quicker.
Rest At The End, Not In The Middle
Paying off debt is not an easy task. This is why so many people that have excess debt struggle with their finances. These debts, restrict cash flow. Debt also puts your hard earned money into the pockets of others.
This is the complete opposite of what you should be trying to achieve.
You want your money, to hit your pockets, and not someone else’s. A great way to achieve this is by paying off your debt and never having debt again. It is literally the biggest pay increase you will ever receive.
The only way to get there, is to sacrifice your lifestyle for as long as required, until the debt is paid off.
If you need to move to eating beans and rice, then that is what you do.
Getting out of debt is not for the weak.
It will be extremely difficult, uncomfortable, and you will think about quitting multiple times throughout.
Do NOT Stop Until The Debt Is Gone!