How To Pay Off Your Debt…FAST!

[Editor’s Note: This is an independent post written by JJ. This post may contain affiliate links. Please read our disclosure for more info.]

When I was in my 20’s, I didn’t mind debt.  I liked stuff more than I disliked debt. Want to buy a house? Get a mortgage. Want to buy a beautiful, but way too big (and expensive) diamond ring for the further wife? Finance it. Want to buy a car or two? Get a car loan (or two). Want to get new furniture? Finance it. Want to go on the vacation of a lifetime? Refinance your mortgage or get a second mortgage. It didn’t matter what it was, I was willing to finance it.

Here’s a secret that we don’t tell too many people and I’m actually embarrassed as I type it…we liked new cars so much that we had a new car every six months for seven years.  Yes, you read that right. We had 14 cars in 7 years.

That was our foolish 20’s. We wasted so much time and money on depreciating assets.

In my much wiser 30’s, I can tell you that I hate debt; my wife and I both hate debt.  Like, hate it with a passion. Here’s the problem, I was stuck with all of this debt from my foolish 20’s so as much as I hated it, I still had to deal with it; we still had to deal with it.

When we were finally going to get rid of our debt, we had a car loan, furniture loan, personal loan, student loans, furnace loan, and a mortgage.  The total amount of our debt was over $285,000.  

We needed a plan! Below are the 5 things that we did to begin to pay off our debt at a lightning fast pace. If you want to pay off your debt fast, you need to implement these steps into your life immediately. You don’t have time to wait.

  1. Get Educated. We heard about Dave Ramsey and began to dive into his teachings.  We formed a group and began following his book called Total Money Makeover (Click here to buy his book).  You can definitely buy this book and transform your financial life alone, but we knew that we needed accountability which is why we met with a small group and completed the book together.  Educating yourself is so important which is why we are passionate about lifelong learning.
  2. Track every expense. How many drinks and snacks do you buy at work or at the gas station?  How often do you fill your car up with gas, but pay inside so you can get a coffee and a donut as well? Every time you make a purchase with cash or a credit card, write down that amount and what it was for. At the end of the week or month, you should be able to see exactly what you spent your hard-earned money on and how much money you spent.
  3. Lock up your credit cards. No using credit cards until you have your spending under strict control. Strict control means only spending money on necessities. Cash only. Dave Ramsey has an excellent envelope system which we still use today.
  4. Make a budget. If you don’t have a written budget, create one. If you have a written budget, update it and use it. Be sure to review and adjust your budget at the end of each month.  Reviewing and adjusting is an important step to be successful.
  5. Pay off the smallest loan first. I really like Dave Ramsey’s philosophy here.  He says to not worry about interest rates rather look at which debt is smallest and start there. Put as much money to the smallest debt as possible.  Make only the minimum payments on your other debts. Once your smallest debt is paid off, take that monthly amount and add it to your payment on your second smallest debt.  That’s called the debt snowball.
  6. BONUS! Here’s a bonus step so you’re extra successful! Do you have any loans that can be paid off by selling and purchasing a less expensive replacement?  Here’s what I mean…one of our car loans was a brand new vehicle. We were able to trade in that vehicle and purchase a much cheaper car. We weren’t able to purchase the car in cash, but we did get rid of about $20,000 in debt by getting a smaller, cheaper car.

Follow those steps and you’ll be on your way to paying off your debt fast. We followed those exact steps and when our debt snowball was aiming towards our student loans (actually, they were my student loans), we were able to pay off all $50,000 in my student loans in 12 months.  That’s the power of the debt snowball!

Fast forward six years and we’re down to $145,000 in debt which consists of a mortgage and one small car loan.  We were able to eliminate over $140,000 of debt in six years. Our next goal is to be completely debt free in ten years.

How about you?  What would you add to this list?  Are you debt free or just beginning your journey towards debt freedom?

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  2 comments for “How To Pay Off Your Debt…FAST!

  1. June 27, 2019 at 1:01 pm

    Wow, congrats on the massive debt payoff so far!

    I like tip “#3 Lock up your credit cards”, but I think cash only is so difficult to do, at least for me. How do you feel about debit cards?

    Personally I am working to repay my own little mountain of student loan debt.

    • June 28, 2019 at 9:40 am

      Nate – Thanks for your comment.

      When we were in debt payoff mode, we followed Dave Ramsey’s system very closely. We only used cash; no credit cards and no debit cards. The only time we used debit cards each month was to withdraw the money we budgeted for the month. Once we had the cash and it was in the envelopes, we locked up all credit and debit cards.

      We were able to make cash only work for us. Maybe with your geographical area and personal situation, it’s more difficult. For us, it was more psychological of handing cash over rather than using a debit card. When I take money out of an envelope to pay for an item and I see that my envelope is now empty, it really makes me think about the real necessity of my purchase knowing that I don’t have any more money in that envelope for the rest of the month. The process of using cash is changing my behaviors and mindset in a real way.

      Have a great day!

      JJ

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