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.
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 the magnitude of how they can 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 you have a newer, fancy car. You probably 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.
However, 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. Sunk costs are decisions you made in the past that you can’t change. You can’t make decisions based sunk costs.
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 to $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 accustomed 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 driven metro area of Washington, DC to the Florida panhandle. 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 skills 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 got yourself fired.
Big Changes Aren’t Easy
I’m not suggesting that any of the above changes are easy. They aren’t. They shouldn’t be. Just keep an open mind and seriously consider them.
These actions 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 savings and retirement, too.
Don’t simply dismiss these ideas without giving them serious thought. The biggest changes offer the biggest rewards.
Once you’ve mastered this step, there’s just one more step to go. That step takes place after you paid off your debt, which we’ll cover next week.
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.