How to Save Money and Get Rid of Debt
I hate being in debt. It causes added stress and an abundance is unnecessary. One mortgage, three car loans, a load of student debt, and lots of credit card balances later – we weren’t feeling too hot. We knew we wanted to eliminate the bulk of our debt so we could start a family with a little less stress (and a lot more money in the bank).
So far we have been able to get rid of our mountainous credit card debt, one (almost two!) of our three auto loans, and even contribute to the savings account! Yay! Here are some of the tips and tricks we’ve used to tackle our debt and to stay motivated during the process.
Define Your Why:
Think of your reason for wanting to pay off the debt. It’s okay to have more than one reason! Your why can help motivate you and keep you on track. For example, we became very motivated when we decided we wanted to start a family. We knew it would be less stressful if we could provide for our child without constantly worrying about our debt. If you are a visual person, create a Vision Board and keep it in a location you’ll see often (nightstand, background on your computer, office space). Or you can even create a Virtual Visual Board on Pinterest! Include motivational quotes and encouraging words too!
Write All Your Debts Down:
Debt can be an easy thing to ignore. When you see your debt, it becomes more real. Once I wrote down my debts and the monthly payments I was making, things got serious. I started asking myself what I could do with all that extra money and how life would be a lot less stressful without the burden of all these additional payments. Not to mention the interest! Talk about depressing.
Formulate a Plan:
There are few different methods to paying off debt. Take a look at the different options and decide what will work best for you and your situation.
Here are just a few methods for budgeting and paying off debt. You could even mix a few together to suit your situation.
Snowball Method – focusing on one debt at a time, starting with the smallest balance
Avalanche Method -focusing on one debt at a time, starting with the highest interest rate.
Half Payment Method – dividing large payments in half and saving money from each check
Cash Envelope System – use envelopes to keep cash stored for certain bills or categories
We mostly used the snowball method. By paying off our smallest balances we were able to free up some money and contribute that toward the larger debts.
Get on the Same Page:
It is very important that you and your partner both agree on the plan for eliminating debt. If you both aren’t on board, it will make the process very difficult, very stressful, and it can create a strain on your relationship. If both of you are excited and committed to saving money and paying off your debt it will not only keep you both motivated, it will make a debt free lifestyle more achievable.
Create and Write Goals Down:
Having a list of written goals will give you motivation and help you maintain the drive. It can be very easy to lose sight and slip into old habits.
Remember, goals should be:
Give yourself a time frame for each goal. Include all short-term and long-term goals that would ultimately help you obtain that debt free status! It will feel amazing to check the box complete as you climb the debt free ladder.
- Payoff Bank of America Credit Card 1/1/16
- Payoff Student Loan 5/1/17
- Save $250 1/15/16
- Payoff auto loan 7/1/16
- Save $1000 11/1/16
- Participate in a no spending challenge
Challenge yourself but be realistic!
Delete Saved Debit/Credit Card Data
If you have your debit or credit cards saved to websites or apps such as Amazon, Playstation Store, Groupon, or even stored on your computer for autofill – delete it. The more difficult it is to purchase something, the more likely you won’t buy something you don’t need. You’ll think twice before grabbing your wallet and filling in the details.
Stop Using the Credit Cards
According to nerdwallet.com, the average U.S. household had over $15,000 in credit card debt! This can be the toughest type of debt to tackle. The minimum payments are not designed to payoff the debt quickly and the interest rate on most credit cards is sky high. Credit card balances can create a vicious cycle. It’s easy to get sucked in and it can be extremely difficult to get off the merry-go-round.
If you can’t pay cash/debit for it, don’t buy it. I know this is easier said than done especially if you rely on that line of credit for the essentials but paying on a card you are constantly adding to is counterproductive. We stopped using all but one of the credit cards and the one was for emergency purposes only. It took a great deal of self control from both of us, but we were able to pull through.
Cut Extra Expenses
Start thinking of things you can cut out. Take a look at your checking account and credit card statements. Highlight anything that isn’t a necessity. Ask yourself if you really, truly need it.
Here are some examples:
TV Services – Netflix, Hulu, Cable/Satellite, Sunday Ticket
Video Game Subscriptions – Playstation Network, Xbox Live,
Subscriptions – Satellite radio, Amazon Prime Membership, Kindle Membership, Magazine Subscriptions
Entertainment – Restaurants, Movies, Gambling
Other – Coffee, Fast Food, Spa Treatments, Gym Membership (if you don’t use it), excess cell phone coverage
Put Extra Money Toward Debt
If you have an excess amount of debt you really should be putting that tax return or bonus toward it. I know, it sucks. You wanted to use that money to go on vacation or to remodel the bathroom. Making large payments toward your debt can keep you motivated and eventually free up some money. Think about how rewarding it will be to go on vacation and not have a ridiculously high credit card bill to come home to.
Round Payments Up:
It can be difficult to remember exactly (down to the penny) what a specific payment is. Rounding your payment up makes it easier to remember and adds extra to the debt without breaking the bank. This is similar to saving your change.
For example my car payment was $242.65 every month but I would apply at least $250. That extra chunk of change may not seem like much but every penny adds up.
Find ways to earn extra money:
Every little bit counts! Return those pop bottles, save change, a side gig or two, anything! (Just be sure it’s legal and doesn’t violate your morals). Put that extra money toward your debt free plan.
Believe in yourself!
You can become debt free! You don’t have to be the typical American family with a crazy high debt to income ratio. Believe and achieve! I have been where you are. We were drowning and it was scary. We aren’t completely free and clear but the progress has been amazing. Just know that getting out of debt is possible and you can do it too!
What motivates you? What has worked for you in the past?
Disclaimer: I am not a financial adviser. This post is only modeled after my personal experience.