Are you sitting on a pile of debt and looking for the fastest way to pay it off?
Depending on the amount of debt, paying off debt can take years.
This might sound frustrating, but think about how long it took to accumulate debt.
Whether it’s a student loan, credit card debts, personal loans, car loans, or a combination of all, we have accrued debt over a long period of time.
So make peace with the existing debt and the time it’ll take to pay off – it’s what it is – and most of all, give yourself a pat that you’re looking into ways to pay off debt and take action.
It’s burying our heads in the sand that makes us miserable, depressed and stressed.
The moment you decide to take action and tackle debt (as you are now!), you reclaim control of your finance.
You no longer let your debt situation bring you down.
By the time you finish this post and implement the suggestions outlined, you’ll feel more optimistic about paying off debt with an actual plan to make the debt go away in the shortest time possible.
The Fastest Way to Pay Off Your Debt
Here’s the first thing you need to do to pay off debt quickly.
1. Know All Your Debt
If you have paid little attention to each debt or avoid knowing exactly how much your total debt is, now is time to get up close and personal with all your debt.
We want to know everything about the existing debt, e.g. the type of debt, the amount, interest rate, the minimum payment and the payment due date.
I suggest you dedicate a notebook to this and write down everything.
I use a simple ledger book like this one to record all my debts and the progress I make.
2. Take One Snap Shot of Debts
Expanding on the above, devote a page of your chosen notebook to list all your debts.
Write them down with details: the type of debt (credit cards or store cards), the amount owed, interest rate, the minimum payment and due date.
Now you have a full picture of how many debts you have and the total amount of debt.
This one-page summary tells you exactly where you stand right now.
3. Decide Your Debt Payment Method
There’re two schools of thought on a debt payment approach.
Whichever option you choose, you start by making the minimum payment for all debts.
Then you pick one debt to attack at a time.
In choosing which debt to attack first, you have two options: you either pay down the debt with a high-interest rate (the debt avalanche method) or attack the smallest debt, regardless of interest rate (the debt snowball method).
Method 1: The Debt Avalanche Method
Choosing the debt with the highest interest rate.
This debt payment method will save you more money than the debt snowball method since you repay the debt with a high-interest rate first.
If saving money on interest rates motivates you, go with this method and work your way down from the high-interest rate debts.
Method 2: The Debt Snowball Method
Choosing the smallest debt regardless of interest rates.
This debt payment method plays on our psychology than a monetary gain.
If you have, say, 5 credit cards debts, paying off the smallest debt gives you a sense of victory and achievement early into your debt paying journey.
It may cost you more money than the debt avalanche method, but encouragement from an early win inspires you to continue attacking the remaining debts.
Know Thyself: Pick One that Suits You
Know your psychological tendency and pick the method that will serve you better in eliminating overall debt.
If you’re an emotional spender, for example, the debt snowball method will highly likely work out better for you.
Remember, there’s no right or wrong.
The one you choose is the right one for you.
Once you’ve chosen the right method, consult your one-page summary above and pick your first debt to attack.
4. Automate Payment
Having made a list of all debts, decided the right debt payment method and picked the first debt to attack, set up an automated minimum payment for all debts, so you never miss a payment and incur fees.
It also frees up your mental energy for other important things with one less decision to make.
And it stops you from dwelling on the debt until it’s time to review it.
5. Throw All the Money into One Debt
Having set up a minimum payment for all debts, it’s time to focus on the one debt you have picked to attack.
Throw every spare money into paying down the debt.
Whether you receive unexpected money, a bonus from work or an extra income from side hustles, the spare money goes to this one debt until it’s paid off.
And do this relentlessly until you pay off all debts.
6. Be Realistic with Debt Payment
Yes, throw all spare money into paying down debt, but make sure you take care of your needs first.
Planning to eat ramen every day until you pay off debt, for example, will backfire your debt pay off plan.
Not only will it make you unhealthy and miserable, but you’ll also most likely give up.
It’s better to have a realistic goal and see it through than beaten by an unattainable goal, back to square one and feel bad about it.
7. Enjoy Detoxing from Spending
Debt paying off journey is an opportunity to detox ourselves from spending.
Buying quality stuff to enjoy a comfortable life is one thing, attaching so much meaning to material possessions is a whole different story.
By putting a lid on mindless and emotional spending, we regain control of ourselves and our life, focusing on what’s really important to us.
8. Read Good Finance Books
Learning is always good, but reading finance books during your debt pay journey is even better.
Good finance books will inspire you to keep up with paying off debt and help you understand why you do what you do.
Besides, we all can benefit from learning the magic of compound interest that enables us to live a financially independent life.
9. Be Aware of Friends and Family
Keep financially savvy friends close – those who are on the same journey as you – and stay away from friends who encourage you to spend money.
Peer pressure is one of the most meaningless things, but difficult to let go of.
Make it easier for you by hanging out with the right people so you can maintain your debt pay off commitment.
10. Keep 10% for Yourself
This important principle in building personal wealth is based on the Pay for Yourself First Budget.
You might think saving is the last thing you want to do when you’re buried deep under debt, but saving for yourself makes you feel secure about unforeseeable events in the future.
Saving also boosts your spirits as, by saving, you know your life isn’t just about being a slave to debt but learning discipline, figuring what’s truly matter in life and preparing for your future.
11. Ditch Your Credit Cards
If you’ve accrued debt from various credit cards spending, it’s time to reset your money habits and eliminate the temptation of spending.
You can definitely undo bad money habits.
Start by leaving the monsters at home!
Do not carry credit cards. Don’t go online shopping. Don’t get tempted by bargains/sales.
Do not rationalise your spending with:
It’s only $5
Oh, it’s buy 1 get 1 free – I’ll need it 6 months later…
If not-buying-today doesn’t inconvenience you, you probably don’t need it.
Racking up more debt will seriously hamper our progress.
I can tell you from my experience that it’s not only beneficial to our bank balance, but it’s also fun.
12. Increase Your Earning Power
Hustlers are everywhere.
You can be one helluva hustler too.
Start hustling while keeping your day job.
Not only will it make you money, but you’ll also discover your new passion or/and talent.
You’ll be more conscious about the way you spend time, learn tons of stuff, increase your skillsets, become a more valuable/high skilled employee, have a better chance of promotion and pay increase or, who knows, become a millionaire!
Most of all, you ain’t got time to check out what’s the next shiny thing to buy!
If you follow the suggestions outlined in this post and take immediate action, trust me, money worries will go away as you take control of your finance.
Look at your one-page summary, think about your motivational factor as mentioned, set up an automated payment for all debts, choose your first debt to attack, throw all the spare money into it and repeat the process until debt becomes history.
With a solid debt-pay-off plan in place, you’ll start enjoying a money-stress-free life even if you have debt.
Debt no longer brings your spirits down because you’ve taken the control of it.
You start shifting your attention to things that bring you joy and start living.
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