Is Debt Payoff Possible?
Mmmm. Paying off debt is no easy task and for some, it can seem like you will forever be in debt. Before I began my own debt payoff journey tackling my $21K of student loan debt, I never truly knew exactly how I would achieve this, but I was determined to do so.
I do think DEBT FREEDOM is possible, but everyone’s journey will be different. Starting the journey is the hardest step and here are some of my tips for approaching a debt free journey:
Face your Debt Number: Take some time to add up ALL of your current debts and understand how much debt you have. This is a critical step in your debt freedom journey. To do this, you can consider using a recent copy of your credit report (if you’re in the US) or your bank and credit card statements to help you with listing your debts. Don’t forget to list debts you owe to others, such as family members or friends, repaying these amounts should be a top priority. You should also include information such as the interest rate, minimum payment and more.
Create a Functioning Budget and Track Expenses Regularly: This is the only way you will be able to thoroughly understand your money habits and see where you can use additional funds towards debt payoff (if possible). Need help with budgeting?
Learn more about Budgeting: https://www.itsfinanciallywinning.com/blog/getstartedwithbudgeting
Use Unexpected Money & Increase Income: Financial Windfalls are one of the ways you can propel your debt freedom journey forward and make progress quickly. When you receive money such as Tax Refunds, Bonuses or any other form of financial windfall, you should consider allocating these funds to accelerate your debt payoff. Increasing your income is another way to navigate your debt freedom journey. While I’m not promoting hustle culture, side hustling can be a beneficial tool (I have personally done this). You can temporarily increase your income through side hustling, then allocate some funds towards making extra debt payments
Choose a Debt Payoff Strategy: It can be overwhelming, especially when you see everything at once. There are various methods but the two main ones are: Debt Snowball, this method is when you just want to gain momentum in your debt payoff journey and gain some quick wins by attacking the smallest debt first, and making additional payments towards the target debt. When I began attacking my student loans, I used the Debt Snowball method. The other method is Debt Avalanche, it makes the most sense mathematically, because you attack the debt with the highest interest rate first.
Learn more about the Debt Snowball Method: https://www.itsfinanciallywinning.com/blog/debt-snowball
Celebrate Milestones: One of the things “personal finance gurus” say is you should not do anything fun while you are getting out of debt, but I disagree. Personally, if I did not still budget for travel and incorporate personal funds for my mani and pedis, I would probably still be working through my debt or would have already given up before. It is important to incorporate celebrating milestones within your debt free journey to continue building momentum!
Bonus Tip: You can choose to pay off your debts by categories. For example, if you want to become credit card debt free, you can list all of your current credit card balances and implement your preferred debt payoff method.
Becoming debt free or at least reducing your debt is a financial life hack you wouldn’t know you needed, until you make it happen!
