Author’s bio: You can find more by Maria Nedeva on debt, money management and making money on her blog, The Money Principle, where she teaches people in financial trouble how to build sustainable wealth.
Becoming debt free haunted my dreams, and my waking hours, for couple of decades. And for decades it was just that: a pipe dream to which I escaped every time I suspected that we have too much debt and every time I wished it to disappear.
Than six years ago the reality of our financial depravity penetrated the dream: we calculated that we were in $160,000 worth of consumer debt.
Was I devastated?
You bet I was.
Did I feel shallow and irresponsible?
I sure did.
But I also realised that I’m fed up with fear; I’m done with guessing; and I’m going to put an end to it. Put differently, I knew that I’ve had enough of debt and that the time of dreaming about being debt free has past: the time to work towards becoming debt free had come.
It took three years and a week to pay it all off and become debt free. (Okay, I remember about the mortgage but this is a whole different conversation, you know.)
Why am I telling you this?
Because I’m telling everybody! Have been doing it for three years now and am still so pleased about becoming debt free – and keeping that way – that you may think it happened yesterday. This is not the only reason, though.
Reflecting back on how fast we paid off this rather large debt (and with interest) I’m going to share five sure fire ways to become debt free fast that anyone can use.
#1. Make additional payments
You have already noticed that this assumes that you are making a sufficient regular payment. Please automate the regular payment you are throwing on your debt.
Once this is automatic you should start making additional payments. These don’t need to be large but they have to be frequent.
Do you have $8 dollars left in your monthly budget? Put it on the debt.
You have some coins weighing in your pocket? Put them on the debt.
You just got bonus/tax return/birthday money? Put it on the debt.
When we were paying off our debt the largest additional payment we made was over $15,000; the smallest was $5.63.
Make additional payments and you’d be surprised to see how fast your debt goes down.
#2. Race to the middle
What I’d like you to do is to add up all your debt. Credit cards, loans, student loans – all of it.
Most strategies for paying off debt focus on whether to tackle the smallest one or the biggest one first; or on whether to focus on the one with highest interest rate.
When you want to become debt free fast these decisions is nearly irrelevant: you can start anywhere you wish.
What matters is to pay off half of your total debt in absolutely record time. Getting to the middle of your initial debt is the sprint of debt repayment.
Why, you may ask.
Because when you get to the middle of your current debt, you’ll tip the sea-saw from paying of more interest, to paying of more principal.
Once you get to ‘the middle’ you can exhale and watch your debt crumble. Until than use every trick in the book to get there.
#3. Keep the focus of a hunter
‘Gazelle intensity’ may fill the internet but it is still something you should forget about; and the sooner the better.
Don’t misunderstand me: I do think that Dave Ramsey is one of the clever people in personal finance and he’s helped loads of people to pay off their debt. Still, he got the ‘gazelle’ thing wrong.
Being a ‘gazelle’ when you’re paying off debt may increase your awareness but keeps you being a prey.
To become debt free fast you need to develop the focus of a hunting tiger. Debt is your prey and you should stalk it with joyful anticipation until it is completely gone.
Small mental changes make very big difference in action and behaviour.
#4. Make it fun
It is hard to pay off debt; it is even harder to pay it off in record time.
This is why it is important to make sure that you enjoy paying off your debt.
You can do this by:
- Finding ways to have really great fun (with family and friends) without paying through the nose for it.
- Making it a game. For example, making a list of three course dinners for under certain cost per person; or testing whether you can start a ‘side hustle’. You have to keep it light though – whether you play or see yourself as starting a business the outcome can be the same.
- Setting yourself little challenges. Can you go a week without spending anything apart from necessities? Can you make $20 extra this month?
- Make it competitive. If competition rocks your boat find a ‘debt busting buddy’ and challenge each other.
- Focusing on the end result. Imagine how great it would feel when all debt is gone. Do this often and embellish the image with beauty, glory and calm.
I love not having debt any longer but paying it off was great fun. You can make it fun as well.
#5. Make more money…
…and put it all against the debt.
People tend to overemphasise frugality and cutting costs when paying off debt.
This is important at the early stages when you have to scout your monthly bills for waste.
After that making more money is even more important. Because cutting costs has very clear limit – you can’t go beyond a point at which you start severely limiting your life. Making more money is without limit and probably the best way to increase your monthly cash flow.
You just have to change the way you think about work, contributing value and money.
Finally…
When we paid off our debt in three years some said that this is because we earn very well. This is true but the debt was very large as well. I believe that we managed to become debt free fast because we applied all five ways discussed above.
We made additional payments often.
We paid off half of our debt in 19 months.
We kept our focus on the debt without allowing it to destroy the fun in life.
We made paying off the debt fun.
We made more money and threw it all on the debt.
What happened?
Well, repayment speeds up so that in year three our debt reduced twice as much as in year one.
You can become debt free and you can do it fast.
Just apply these five sure fire ways to become debt free fast.
Great post. All of these tips definitely work. One of the smartest things we did when getting out of debt many years ago was tracking our spending. Getting real with how we were spending our money was a huge game-changer for us.
I like paying down smaller loans with the Snowball method. It’s totally irrational but at least you feel good and are making headway into an impossibly large loan balance