If you want to pay off your debt but the whole process seems daunting, you’ve come to the right place. I started out with almost $38,000 in debt, and in the beginning, I couldn’t imagine being able to pay all of it off, much less in two years. I made a lot of mistakes when I started out paying off my debt, but I also learned a lot of valuable tips that made the process easier. If you’re just starting out, do yourself a favour and follow these beginner debt paying tips:
For the later half of my debt repayment journey, I was paying over $1,000 towards my debt every month. But do you think I started out that way? Heck no! I started out paying my minimum monthly payments and an extra $50 per week. That’s all I could afford on my modest post-grad budget.
Eventually, whenever I got a raise or was able to trim my budget, I’d put the excess into debt repayment, but it was those humble $50 beginnings that trained my brain to pay off debt week in, week out. Sure you won’t see results as fast, but any amount is better than nothing, and a year from now you’ll wish you’d started today. (Eww, I just quoted Pinterest).
Take the Small Wins
I had a habit where I would do a happy dance every time my total debt, my student loans, or my car loan would roll down into another $1,000. So when my total debt went from the $37,000 range to the $36,000 range, I celebrated. When my student loans when from the $26,000 range to the $25,000 range, I celebrated, and so on.
This happened once every few months at first, and it was enough to keep me feeling like I was making progress. Eventually these wins came more often and I moved on to bigger goals like getting under $10,000 with my student loans, but at first, these small wins sustained me.
Squeeze That Budget, Slowly
If you’ve started budgeting, awesome! If not, this is the first step to becoming debt free, so what are you waiting for? For those who already have a budget, I bet there is some fat in there to be trimmed. You might be spending too much on groceries (I spend $400 for a two person household, for reference) or entertainment ($200 for two people).
If you are spending too much in any one area, start walking those numbers back, slowly. I used to spend closer to $550 on groceries per month, so every month I would subtract $10-$15 from that amount. The amount was so insignificant I barely noticed, until eventually I got to $400 per month. Guess where that extra cash went? That’s right, to debt repayment. My $50 weekly debt payment grew.
It’s 2015. If you have cable and you say your budget can’t be trimmed, I judge you a little. Get Netflix and learn to stream sports games online. You’ll live, I promise. I’m a HUGE television nut and I was just fine. Plough those savings back into debt.
Understand This is a Marathon, Not a Sprint
In all likelihood, your debt repayment journey will last years, not months. For this reason, you need to be able to live with your lifestyle choices. Giving up your entertainment budget completely is fine, but it’s not sustainable. Eventually you are going to want to see your friends.
A better choice would be to live on a dramatically reduced entertainment budget. The benefit of this kind of thinking is that you will establish sustainable financial habits that will hopefully stick with you once your debt is gone. If you take a sustainable approach, maybe you continue to budget after debt. Maybe you put that debt repayment money into an emergency fund instead, or retirement, or a house savings fund. Getting out of debt is only the first step on a long road. Staying out of debt, now that’s the tricky part.
What’re your top beginner debt repayment tips? I want to know!