5 Easy Ways to Pay Off Debt

5 Easy Ways to Pay Off Debt

5 Easy Ways to Pay Off Debt

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The idea is to set a goal, start an emergency fund of $1000 for incidentals like car repairs or an unexpected medical bill. After you save that up, create a budget and start your chosen debt repayment plan

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Who wants to be Debt-Free? Don’t all speak at once. If you’re working to pay off debt then this post is for you. Millennials know debt all too well. Its as if we were raised up in it (sarcasm implied). By the time you graduate from college, on average, most Millennials have $29, 800 in debt. According to an article on Business Insider’s website, most of the debt being Student Loans if not all of it. This article possesses some pretty disturbing statistics about Millennials and Debt and I’ll be the first to admit that I’m a victim of some of these circumstances.

Business Insider reported:

“There’s no way around it: The average American millennial is financially behind. 

Faced with a high cost of living, staggering student-loan debt, and the fallout of the Great Recession, American millennials are trying to make ends meet in the midst of The Great American Affordability Crisis.

The financial crisis split the generation into two distinct groups. Older millennials, who bore the brunt of the financial crisis dealt with a tough job market and wage stagnation, making it more difficult for them to save. Younger millennials, who experienced the recovery period, entered a better job market and became risk-averse by watching the recession unfold.

The generation overall, however, is plagued by financial problemsthat baby boomers didn’t have to face at their age. From saving to spending and financial behaviors in between, here’s what life is like as the average American millennial.” – Reports Business Insider

Business Insider – https://www.businessinsider.com/average-american-millennial-net-worth-student-loan-debt-savings-habits-2019-6

This is disturbing but not at all surprising because I live this reality every day. The best I can do is combat it and try not to let this be my reality going forward. You should do the same. What I’ve learned on my journey is that there are many ways in which you can become debt-free. It’s just all about what you’re willing to do and how comfortable you want to be while doing it.

The first step is to find out how much debt you have. I would suggest using a Google Sheet or an Excel Spreadsheet. Gather all your bills in a pile and then go through them one by one. Enter the owed amounts into your Google Sheet or Excel Spreadsheet with interest rates and monthly due dates if applicable. Keep paying on the active debts not in the collection while building your $1000 emergency fund. This is something that Dave Ramsey suggests to do before tackling your debt using one of the methods that I’m going to mention below.

I think however you decided to tackle your debt, a starter emergency fund is a necessity to help bulletproof your Debt Repayment Journey. Here are 5 Best Practices for paying off debt:

Use the Snowball Method to Pay off Debt

Dave Ramsey often encourages us to utilize this method. Basically, you’ll take your accounts with the lowest balance and work your way up hence the name Snowball Method. For those bills that have already hit collections, call those creditors to see if you can settle for more than 50% of the balance. This usually helps you to free up some extra funds to put towards the next piece of debt. You’ll then continue to rinse and repeat until you’ve paid off your last highest bill. Using the snowball method creates a habit for you as well as activates the reward center in your brain each time you pay something off.

This will further motivate you to keep paying off debt.

Use the Debt Avalanche Method to Pay Off Debt

The Debt Avalanche Method is when you take the debt with the highest interest rate first and work to pay that off first. Doing this helps you to prevent yourself from paying more money in the long run. From there, you work your way down to the balance with the lowest interest rate. Dave Ramsey has an entire page dedicated to comparing the two methods against each other to help you decide which method may be best for you. Check it out here——->https://www.daveramsey.com/blog/debt-snowball-vs-debt-avalanche

Stick To Your Budget to Pay off Debt

If you want to be Debt Free. Set a budget and stick to it. Dave Ramsey created his own app called the Every dollar app. I use a similar system. I like to write my budgets down in my planner as I budget out bi-weekly (per pay period). If you’re a tech person then I recommend using the app, if you like to write things down as I do then keep reading. What I did was I took the ideology that Ever Dollar teaches and I implemented that when creating my budget. The idea is to assign a job to every single dollar of your income. so if you bring in $2000 every week, you need to tell that $2000 what to do.

An example would look something like this:

Bi-Weekly Net Pay: $2000

Pay Myself 10%: $200

Church Tithes: $200

Cell Phone: $100

Electricity: $50

Water: $120

Heat: $220

Student Loans: $345

Groceries: $100

Clothes: $50

Car Insurance: $100

Car Notes: $250

Entertainment: $100

Household: $65

Credit Card Debt: $100

All of this equals $2000. Of course, I made up totals but do you see what I did there? I assigned a job to every single dollar and that’s the idea of the Ever Dollar Budget. This is so that you know where your money is going at every single moment. The cool thing is that it also shows you what’s you consider to be a priority and then allows you to tweak from there.

What I would suggest is creating an Every Dollar Budget based on when you get paid and budgeting accordingly. You’ll where you have room to pull from other categories such as clothing or entertainment to help you pay off debt faster.

Start A Side Hustle to Pay off Debt

Do you have Entrepreneurship in your genes? Start a low overhead side hustle. We have so many resources at our fingertips nowadays. All you need is a little time and specialized knowledge. One of my favorite books that talks about Specialized Knowledge are Think and Grown Rich by Napoleon Hill. Many Millennials make living leveraging expertise in a certain Niche Topic. What do you know that you could consult people on with your eyes closed and hands tied behind your back?

What do you know how to do or make that you could sell. Starting a side hustle Is one of the most popular ways to help yourself get out of debt faster.

Pick Up a Second Job

I’m probably the queen of picking up a second job when hit when an unexpected expense. I just had to do it recently during the holiday season when I ended up having to pick another Wedding Dress and fund it myself. here I was at my local Target during the holiday rush working a retail job like I was back in college again. Don’t ever feel like you’re too good to pick up a second job just because you work a corporate job. This is another way to protect your savings and investments when things come up as well as another way to help you pay off your debts sooner.

Conclusion

I’ve just shared with you some pretty fail-proof ways to pay off your debt. The idea is to set a goal, start an emergency fund of $1000 for incidentals like car repairs or an unexpected medical bill. After you save that up, create a budget and start your chosen debt repayment plan. Snowballing it or Avalanching will both get you to the same goal. While paying off one bill, be sure to pay the minimum on all other debts owed until all debts are satisfied.

If you end up having to tap into that emergency fund for an unexpected expense, don’t worry. You’ll just work to rebuild that Emergency Fund back to $1000 and then you’ll restart your Debt Repayment Plan. If you have additional ways that you’re paying off debt, please share in the comments below. Are you currently paying off debt?

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