Top 5 Debt Payoff Strategies
I'm often asked how we paid down our consumer so quickly. It hasn't been easy but it's been super worth it. And we've been surprised by how much we achieved by buckling down and getting serious with our finances. That said, here are my top 5 debt payoff strategies!
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STRATEGY #1: Know where you stand. A report in The Atlantic from 2015, showed that, "American households estimated that they owed about 40 percent less than what their lenders said they owed on credit cards—about $440 billion compared to $731 billion."
We were in that group of folks who were playing this guessing game. We figured we had a few thousand dollars on credit cards but were shocked when we actually sat down, pulled out all our credit card statements and added them up. We were more than $10,000 in the hole.
To be honest, the number was closer to $13,000. We also started reading the fine print and found out that if we continued carrying balances, our payoff date on this amount would be 6 years! This exercise gave us the wakeup call we didn't know we desperately needed.
Ideas for how to do this:
- Don't leave anything out! Gather all your bank statements, credit cards statements and student loan statements.
- Create a spreadsheet listing all your debts and total them.
- Make a big chart! Visual aids are everything.
I would also recommend checking to see what your credit score is and what items are currently impacting it. Although you are now working on getting out of debt, I believe it is still important to maintain a high credit score because if affects so much of your adult life, for example, if you plan on buying a house in the future. You can check your credit score for FREE using Credit Sesame.
STRATEGY #2 Teamwork makes the dream work. We were on the same page in terms of wanting to completely obliterate all our debt ASAP. But in terms of the roadmap we planned on using, that was a different story. That's where we learned the magic of compromise and it's really come in handy since we began this journey.
To backtrack a bit, my husband and I really never spoke much about finances when we first got married. Money came in and money came out -- that was the extent of our "budgeting" each month. However, as we got intentional with our money habits, it also helped for us both to list out some personal goals that we each had and commit to working on them as a team once we became debt free. One of my goals is to be able to take a trip to Jamaica (that we can actually afford to pay cash for) and one of his is to add to his baseball card collection!
Going back to the concept of compromising, here's what that looks like for us. February 2017: I wanted to spend some money to start this blog. Hubs compromised by agreeing to scale back on our budget for eating out. In March 2017: Hubs asked to do some fishing activities and I agreed to scale back on our grocery budget to accommodate for this.
These steps have helped us to avoid money arguments during our debt free journey.
STRATEGY #3 Run your household like a business. We put on our business thinking hats (if that's a thing)! To break it down, when a business is bleeding money, it means that its time to significantly trim expenses and/or boost income.
We decided to attack the expenses side more aggressively especially because we really couldn't figure out where our money went each month.
This exercise taught us that we were literally throwing away money for things we weren't using like certain subscriptions I didn't even know existed. Related: Check out this article for 21 things we did to cut our budget in half in 2016.
STRATEGY #4: Consolidation has its benefits. We took advantage of a 0% APR balance transfer offer from our bank which allowed us to save a considerable amount of interest. It also gave us another incentive to meet our goal of credit card debt freedom because these types of offers come with a deadline!
If you would like to see a detailed explanation and exactly what we did then see this article.
STRATEGY #5: Refinance where possible. In 2016, we were able to refinance our mortgage and lower our payment by $500 a month.
If you have student debt, then you might also consider refinancing your loans. However, it is so important to do your research and shop around for the best rates and terms possible.
I recommend LendEDU as your starting point if you'd like to refinance your student loans. Why? Well one of the biggest reasons is that LendEDU is the hassle free way of comparing interest rates and terms for up to 12 respected companies such as SoFi and Citizens Bank after following a few easy steps.
Although I did not refinance my student debt because they were already paid off, I spoke to a few friends who had refinanced without starting with LendEDU. All of them said that the hardest part of the process was doing the research on their own. It took forever and made the entire process that much more stressful. Let's face it, ain't nobody got time for that!
They were very interested to learn more about LendEDU and any costs or risks. They good news? There aren't any that I have seen in my extensive research of the company and their website.
Here are a few more things to know about LendEDU:
- The application does not affect your credit score (there are no hard pulls on your credit report).
- It's super easy to complete the application. It takes about 90 seconds.
- Your information is safe and secure.
- You can compare multiple offers at the same time.
- It’s 100% FREE! There is zero cost to you.
If you are struggling with your student debt and would like to know what lower rates you may qualify for, use this link to complete LendEDU's 3-minute questionnaire. Let me know if you have any questions. In the meanwhile, I'll be working on a detailed explaining about student loan refinancing and can't wait to share it with you.
BONUS STRATEGY FOR PAYING OFF DEBT: I figured I'd throw in a bonus in here! That is, find some accountability partners. I am so fortunate to have found the debt free community on Instagram -- everyone is so encouraging, and it really helps to know that you aren't the only ones going against the "norm" in terms of really attacking financial goals!
RESULTS: Where has all this hard work landed us? In 6 months, we eliminated 9 debts and managed to pay cash for a truck! We were shocked (in a good way this time) at how quickly we were able to turn this goal into a reality through teamwork, dedication and learning a bit of contentment. Up next for this year, we'll be paying off my car note which is about $11,000 and save up $20,000. Very ambitious goals but we are really excited to finally start building savings and planning for retirement since we’ve only been chipping away at debt lately.
Have you been working on your debt free journey? I'd love to hear from you in the comments below.