Want To Kill Your Debt? Big Changes Lead To Massive Pay Offs

Are you ready to pay off your debt but have no clue where to start? Read the first post in my series about paying off your debt, then read through this series until you get to this post, our eleventh in the series.

Kill Your Debt Follow Me on Pinterest I bet you’re excited that you’ve been able to make a plan of which loan to pay off first. It’s even more exciting when you start to see the progress you’ve made from changing your mindset and making some small changes in  your financial life.

I have some even better news, though. Now it’s time to start making some big changes that can completely transform your debt pay off plan and speed up the process immensely!

Big Changes Will Have The Largest Impact On Your Plan

Small changes are a great way to start shifting your mindset. Those changes will get you excited as momentum grows in your debt pay off journey. Unfortunately, there are only so many small changes you can make before you run out of ways to save a few bucks here and there. That’s when it’s time to bring in the big changes.

Many people resist these big changes, but magnitude of how they change your debt pay off plan can be HUGE! Don’t immediately dismiss these ideas as crazy. Many people have made these changes and have made amazing progress because they were open minded enough to embrace big change.

Sell Your New Fancy Car

Chances are if you have a newer fancy car, you have a car loan to go with it. Yuck, that’s more debt you have to pay off! Want to know a quick way to get rid of that debt and get further ahead in your debt pay off journey? Sell the car and pay off the loan. Am I insane? Not at all!

A car is for transportation, it should not be a status symbol. Yes, you may need a reliable car to get to work and run errands around town. I totally agree with you, but you can easily find a car that will meet those needs for $5,000 to $10,000, rather than the $30,000+ that some of the fancier cars and SUVs cost today.

What about all the money you’ll lose by selling your brand new car? It’s a fact of life, but it is a sunk cost. You can’t make decisions based sunk costs. Sunk costs are decisions you made in the past that you can’t change. You’ll never get that money back whether you sell the car today or 3 years from now. It’s gone. The only difference is you’ll lose even more money as the car gets older.

With $5,000 to $10,000 cars, you won’t lose anywhere near as much money to depreciation each year. Just think how nice it’d be to have a much smaller car loan, or even no car loan at all! Is all of that extra debt worth your fancy ride? You might even save money on your car insurance due to the lower value of your new to you $5,000 – $10,000 car!

Downsize Your House

Housing is normally the largest category in any budget. If that’s the case in your budget, then it’s also the largest opportunity to make a dent in your debt pay off! Americans have grown accustom to huge homes with a ton of rooms that they rarely use for anything other than storage or allowing someone to sleep at your house once a year. Why pay for all of that extra space you never use?

Just like with your car, you can downsize your home, too! Whether you simply move to a smaller, cheaper home when your lease runs out or you decide to sell your home to move to a more appropriate dwelling, this is possibly one of the biggest wins you can ever score. Whatever you do, make sure that you think this through for a long time. If you just end up upgrading again shortly after you downsize, you’ll have wasted a ton of money moving and in real estate fees if you owned your homes.

Move To A Different Area

Want to save even more money on housing and potentially everything else in your budget? Consider moving from a high cost of living area to a low cost of living area. Where you live has a huge effect on how much money you spend every month.

I personally moved from the rat race Washington DC metro area to the Florida panhandle and it is one of the best decisions I ever made. I was lucky enough to keep a similar salary and almost all of my living expenses cost less in Florida. Plus, there’s no income tax! It was a huge win for us and it saved us thousands of dollars.

Get A Job That Pays You What You Deserve

Your income from your job is one of the biggest limiting factors in your debt pay off plan. Due to the massive constraint income places on your plan, you should look to optimize your income as much as possible. If you’re being underpaid for your skill level, now is the time to see what you can do to raise your income.

You can ask for a raise, if you’ve shown you deserve one. If that doesn’t work, you can always look for a new job that pays you in line with your skill and abilities. Just be careful not to burn any bridges in the process. Your current income is a lot more than you’d get if you pressed the wrong button and get yourself fired.

Big Changes Aren’t Easy

I’m not suggesting that any of the above changes are easy. They aren’t and they shouldn’t be. Just keep an open mind and seriously consider them. The actions listed above can save or earn you thousands of dollars a year that you can use toward your debt pay off plan. Once your debt is gone, it can kick start your retirement, too! Don’t simply dismiss them without giving them serious thought. The biggest changes offer the biggest rewards!

Did you make any huge changes in your life in order to pay off your debt faster? We certainly did and it helped us pay our debt off faster than we could have ever imagined! Let us know what big changes you made in the comments below!

Image by: Images_Of_Money Text added by: Lance Cothern

Grow Your Income To Kick Debt Pay Off Into Overdrive

Are you ready to pay off your debt but have no clue where to start? Read the first post in my series about paying off your debt, then read through this series until you get to this post, our tenth in the series.

Grow Income Pay Off Debt Follow Me on Pinterest We never would have been able to pay off my wife’s $80,000 in student loan debt as fast as we did without following the simple concept we’re about to discuss. After we had changed our mindset and cut our expenses back to the minimum we were willing to accept, there was nothing more we could do to reduce our expenses.

If we quit there, we’d have a fixed time period that it would take to pay off our debt. It could never get any shorter. If things popped up, then it could take longer, but we could never pay the loans off faster without making more changes.

Most people quit after they reduce their expenses. Reducing expenses is the easiest thing to do, but the easiest things generally rarely reward you the most. It’s the harder things in life that have the best rewards and this tip is no different. Instead of focusing on lowering your expenses more, you need to shift to earning more income. The best part about this tip? You have unlimited potential to earn more income. When you were cutting expenses, there was only a finite amount you could cut. Not so with income growth.

Start Growing Your Income Any Way Possible

There are a million ways to grow your income. You can pick up some overtime shifts or find a part time job that allows you to work nights or weekends. You can start a small business selling or reselling goods on eBay or etsy. You can sell a service to people in your community. The number of ideas on how to earn extra income are endless.

Most people immediately think of earning more income from overtime, another full or part time job because that is what they’re taught to think of. Once they realize most of these jobs pay $10 an hour or less, they get discouraged and quit. It doesn’t matter how much extra income you earn in the beginning. The simple fact of hustling to earn more to pay of your debt quicker will get the creative juices flowing. Even a $10 an hour part time job on nights and/or weekends can significantly speed up your debt pay off plan.

However, if you don’t want to settle for a $10 an hour job, I don’t blame you one bit. Rather than working for someone else, starting your own side hustle can be much more rewarding both mentally and monetarily. There are many businesses that you can start with little to no money up front. You’ll need to go with one of these businesses, because you won’t have any extra money during your debt pay off program.

Some of the best types of low cost of businesses to start are service based businesses. I got lucky when I started my blog, for less than $50 I had everything I needed to start! Of course, at the time I had no clue I’d make money with it. Other types of service businesses include pet sitting, walking or grooming, lawn care, cleaning services, cooking services, coaching and tutoring. You might have to get started by working for free to get reviews, but once you have just one happy customer you can start growing your business!

The best part about extra income is that it doesn’t have to stop once you pay off your debt. If you find a side hustle that you love, it could even turn into your main income one day!

Use The Extra Income To Pay Your Debt Down Quicker

The key thing to remember about this extra income is that you’re earning it to pay your debt off quicker. As soon as you get a paycheck or a payment from a client, you should deposit it in a bank account earmarked solely for paying off your debt (after you account for taxes, of course). Don’t co-mingle it with your other money, or else you might be tempted to spend it. You’ll be shocked by how much even a little extra income can shorten your debt pay off journey!

How Extra Income Helped My Wife and I

Extra income played a huge role on our journey to pay off my wife’s $80,000+ of student loan debt. My wife ended up picking up some extra overtime shifts at work that paid very nicely and I ended up turning my cheap hobby to some pretty nice income here on my blog. Without this extra income, I’d say we’d easily have to spend a couple more years paying down debt, but instead, we’re student loan debt free! It was totally worth the time to earn the extra income.

The next step, after earning extra income, is to make some massive changes. Click here when you’re ready to take the next step!

What ideas do you have for side hustles that can bring in some money to help pay down your debt? Do you already have a side hustle? I’d love to hear about it.

Picture by: wsssst Text added by: Lance Cothern

Create A Customizable Debt Pay Off Plan That Fits Your Needs

Are you ready to pay off your debt but have no clue where to start? Read the first post in my series about paying off your debt, then read through this series until you get to this post, our ninth in the series.

Customizable Debt Plan Follow Me on Pinterest Everyone’s debt situation is unique. That means that not everyone’s debt pay off plan will fit perfectly within the debt snowball or debt avalanche methods. If you’re in that situation, that’s perfectly fine! Instead, you can create your own customizable debt pay off plan!

Don’t try to force yourself into a mold that simply won’t fit your situation. It doesn’t make sense to set yourself up for failure. Instead, take the good from each method and add your own twist to make a plan that will work for you.

Not Every Debt Situation Is Black And White

When we were formulating our debt pay off plan we realized that paying off debt isn’t as simple as picking the debt avalanche or the debt snowball. There were more factors to take into account, but our debt was a simple scenario because were only trying to pay off student loan debt. First, some of our interest rates were variable while others were fixed. The other issue we had was some student loans were federal loans while others were private loans.

So how did we formulate our customized debt pay off plan? First, we figured out which debt was the worst offender of the bunch. This was easy because our worst loan had the highest interest rate, was a variable loan and was also a private student loan. Next, we attacked that loan with everything we could throw at it.

It took many months before we had to start paying off our next loan. All we had to do in the time between picking our worst loan and completely paying it off was ensure that another loan didn’t because more urgent before we paid off the worst offender loan. Luckily for us, nothing changed, but if it did, we’d simply switch which loan we were aggressively paying off.

Once we had our first loan paid off, we looked at our situation and figure out which loan was the next worst offender and aggressively paid it off. We then continued this process over and over again until all of our student loan debt was vanquished!

Some Variables To Consider When Formulating Your Plan

There are many different types of debt out there, so it is important you fully understand your debt situation. One key is knowing whether your debt is secured debt or unsecured debt. Your debt is considered secured if took a loan to buy a car, a home or another large asset that you put up as collateral. Your debt is considered unsecured if you simply signed your name to a loan, such as a credit card, a personal loan or a payday loan and didn’t offer any collateral.

What difference does it make? If you quit making payments on a secured loan, you can lose your car, your home or whatever other assets you secured the loan with. If you quit making payments on unsecured debt such as a credit card, personal loan or payday loan, then the company will have to sue you and get a judgment in order to garnish your wages or force you to pay. Either way, you should do your best to always pay your debt back and not make late payments.

Another factor to consider is the fact that there are debts with special treatment. Student loans and tax debt are two types of debt that are very difficult to get rid of. Many people advocate paying these debts off quickly due to the fact that more extreme measures can be taken to collect on these types of debt. The government can take your tax refunds and garnish your wages to collect on these types of debt.

It is also important to know which of your loans have variable interest rates. As interest rates rise, so will your interest on your variable debt. Most credit cards have variable interest rates, as well as some private student loans along with many other different types of debt such as adjustable rate mortgages. Fixed interest rate debt will not change the interest rate as rates rise or fall.

You’ll have to look at these variables and figure out which ones are the largest threats to your debt pay off plan. Figure out which loan you think is the worst offender then get started with your extra payments! The faster you start paying debt down the faster you’ll pay it all off! Make sure to come back next week for our next installment about growing your income!

Which loan do you plan on paying off first? Will you use the debt snowball, debt avalanche or your own customizable pay off plan?

Everything About The Debt Avalanche Method Of Paying Off Debt

Are you ready to pay off your debt but have no clue where to start? Read the first post in my series about paying off your debt, then read through this series until you get to this post, our eighth in the series.

Debt Avalanche Pay Off Debt Follow Me on Pinterest Now that you know the details about the debt snowball, which offers a psychological boost in your debt pay off journey, it’s time we discuss another debt pay off method. The second method I’d like to introduce is called the debt avalanche.

The debt avalanche is very similar to the debt snowball method of paying off debt, with one major change. Instead of paying off the loan with the smallest total balance first as the debt snowball method states, you’ll instead pay off the loan with the highest interest rate first.

The debt avalanche is seen as the logically optimal way to pay your debt off in the quickest manner possible. By paying off the loan with the highest interest rate first, you’ll lower the amount of each payment that is applied to interest at a faster rate than you would with the debt snowball. Each payment will result in more and more money being applied to actually paying down your principal, or the amount of debt that you owe.

If this is the quickest way to pay down you debt, you might be wondering why people advocate other debt pay off methods other than the debt avalanche. Let’s take a look at the pros and cons of this method.

Pros Of The Debt Avalanche Method

  • The debt avalanche will pay your debt off in the fastest manner possible.
  • You know your money is being put to the best use in your debt pay off journey.
  • You could save a ton of money in the long run by picking the debt avalanche over the debt snowball method.

Cons Of The Debt Avalanche Method

  • The debt avalanche can result in you waiting a long time to pay off your first loan. This can be a huge psychological blow.
  • People are emotional beings which can throw you off the path of the debt avalanche.
  • The difference between the debt avalanche and debt snowball may be minimal for your particular debt situation.

As you can see, the debt avalanche has financial advantages, but if you can’t stick to the plan then you might get yourself in trouble. The debt avalanche is more advantageous when your loans that you owe the most on have the highest interest rates. If your highest interest rates are on your smallest balance loans then it doesn’t make as big of a difference.

Now that you understand both the debt snowball and debt avalanche methods and their pros and cons, we’ll discuss the other options you have when choosing a debt pay off method.

If you’ve paid off debt in the past, did you use the debt avalanche? If so, do you see yourself as a more logical or emotional decision maker? I’d be interested to see if any emotional decision makers picked the debt avalanche method! Let me know in the comments below!

Everything About The Debt Snowball Method Of Paying Off Debt

Are you ready to pay off your debt but have no clue where to start? Read the first post in my series about paying off your debt, then read through this series until you get to this post, our seventh in the series.

Debt-Snowball-Pay-Off-Debt Follow Me on Pinterest We’re finally ready to discuss one of the potential methods to pay off your debt. Now that you’ve changed your money mindset and your money habits, you just need to pick the method or combination of methods that will work best for you. Let’s get started with one of the most popular debt pay off methods, the debt snowball.

What Is The Debt Snowball?

The debt snowball is a term that was popularized by personal finance guru Dave Ramsey. It’s really simple to follow and that’s why so many people have had success with it. Essentially, you take your list of debts that you owe (remember, you made this list in our very first post in the series) and order it from the debt with the smallest balance owed to largest balance owed. As you always should, you’ll make the minimum payments on every debt you owe.

The key is that any extra money you have left will all be paid toward your debt with the smallest amount owed. This will result in getting rid of some of your debts quickly and give you motivation to continue your debt pay off journey. Once you pay off your first and smallest debt, you’ll take all of your extra money AND the original minimum payment from that loan and pay all of that money toward your debt with the next smallest balance.

Continue rolling these amounts over as you eliminate loans and the amount of the payments you’ll be making will increase until eventually all of your consumer debt is gone. Then, if you want, you can attack your mortgage if you have one.

If you haven’t picked up on the metaphor yet, as you pay off each debt the amount of money you’ll apply to the next loan you’re paying off will increase, much like a snowball rolling down a hill! Pretty cool, huh? While this method is psychologically motivating (you’ll be paying off individual debts quickly in the beginning), it isn’t the mathematically optimal way to pay off your debts.

The mathematically optimal way is called the debt avalanche, which we’ll discuss next week. For now, let’s just focus a bit more on the debt snow ball and the pros and cons of this method.

Debt Snowball Pros

  • This method is really easy to follow. It doesn’t involve making any decisions other than the decison to follow the debt snowball methodology.
  • You’ll pay off your first debt pretty quickly (hopefully) and that will give you motivation to pay off the next debt faster.
  • As you pay off each debt quickly in the beginning, you’ll quickly begin to see the size of the payment on your smallest debt (your debt snowball) grow which is very encouraging.

Debt Snowball Cons

  • The debt snowball is not the mathematically optimal way to pay off your debt. You could end up paying off a 0% car loan before you paid off a 25% credit card loan if the car loan had a smaller balance.
  • The debt snowball can over simplify your debt situation when in reality there are other factors to take into account in which debt you should pay off first.

As you can see, the debt snowball method has some great benefits but it has its flaws as well. If you’re majorly overwhelmed and just want to see some solid progress, this method might be best for you. However, if you’re a more logical person who doesn’t need to see a psychological payoff early on in the process, you might want to consider another debt pay off method.

In our next post in the series, we’ll discuss the debt avalanche. The debt avalanche is an alternative to the debt snowball debt pay off method that makes more sense for logical minded people to follow.

Have you ever used the debt snowball method to pay off debt? Did it work for you, or did you prefer another method? Do you have any questions about this method that I could answer for you?

Photo by: ff137 Text added by: Lance Cothern