Paying down debt was one of the best things I decided to do. It allowed me to save more, buy more, and do things like quit unhealthy jobs.
A few years ago, I received a Bachelor’s degree in Finance, so I know the book version of navigating personal finances at an expert level. But I can now say nothing compares to real life experiences, especially since I know the way a professional financial planner would manage my financial situation. Living through it on a day-to-day basis with real life emotions is very different than mapping out a plan on a spreadsheet. I plan to talk more about my debt and career journey including how I got into over $20,000 of credit card debt and how I paid off most of it, so be sure to follow and subscribe to get notified when I write that article!
Here I’m sharing some of the debt payoff strategies I learned and have used throughout my journey. These strategies are easy and reasonable ways to get out of debt without committing to a super limited budget or needing to work 3 side hustles alongside a full-time job.
Why Did I Focus on Paying off Debt in the First Place?
For me, I decided it was time to focus more on paying off debt when I did my budget and saw just how much of my expenses were actually debt payments. Then I started to realize I was missing out on a lot. I remember thinking that if I didn’t have all this debt, I’d have more savings, more money to splurge with, a better money mindset, and the freedom to explore different career opportunities. Once I mapped out a debt payoff plan using some of the methods below, I immediately got happier. I slowly started having more money to save, more money to spend, a better money mindset, and the opportunity to actually leave a toxic job because my lower expenses and bigger savings allowed me to. I wasn’t able to take career breaks or switch careers before because I spent most of my income paying debt, so taking a pay cut to switch careers or taking time off would mean I wouldn’t have enough money to cover my bills. I’m finally no longer drowning, here’s how I did it.
Debt payoff strategies I’m using
Debt snowball
This is the first method I learned about when looking up ways to pay down debt. It works by first figuring out how much extra you can afford to pay towards debt after all minimum monthly payments are made. Then you pay that “extra” amount towards the debt with the lowest balance while only making the minimum monthly payment towards everything else. This will speed up the time it takes to fully pay off that debt with the lowest balance since you are making more than the minimum monthly payment. Once that debt with the lowest balance is paid in full, you then take that same “extra” amount plus the original minimum payment and “snowball” it towards the next lowest balance debt. As the debts continue to fall off, the snowball will continue until all debts are paid. This snowballing effect is what helps you pay down debt much faster than just making the minimum payments or randomly applying extra money towards a bill. Using this is what gave me a sense of light at the end of the tunnel since I could finally see a real date of when I’d be completely debt free.
Debt avalanche
After a while, I switched from the debt snowball method to the debt avalanche method because I realized this would actually help pay my debts off a few months sooner. Debt avalanche works similar to debt snowball except instead of making the extra payment towards the debt with the lowest balances, you’d make the extra payment towards the debt with the highest interest rate first. This strategy worked better for me because of my mix of high-interest credit cards along with other lower-interest debts.
Other methods
Those two methods work pretty well on their own, but there are a few other methods I used in combination including:
- Hybrid payoff methods — an example of a hybrid method I used at one point was the strategy of paying off debts with the highest monthly payment first. I did this to lower my debt-to-income ratio when I was considering buying a house. Another hybrid method I used was to pay all credit card debts first then term debts like personal loans or student loans.
- Consolidation loans — typically offered as a personal loan in the amount of several debts to pay off resulting in just one single monthly payment rather than several. This strategy isn’t for everyone but worked best for me when I had a ton of high-interest credit cards with large balances.
- Credit card balance transfers — some credit cards offer the ability to transfer balances from one card to another or pull cash from your card for a specified fee and typically for a 0% or very low interest rate. This method is super risky, but worked for me due to several reasons. I plan to share that story sometime soon, so make sure to follow to get notified when I write that post!
If you noticed, I mentioned that I’ve been paying “down” debt, hinting that I am still in this payoff journey. As my financial situation changes, I rearrange my debt payoff plan to whatever works best at that time. I’m now 2 years in using a mix of everything I shared in this article, and because of these strategies my monthly payments due have also decreased by $1,000 over the past year which has allowed me the ability to walk away from a toxic job, save more than I was able to prior, and has given me a better peace of mind. I still have quite a bit of debt left to go, but I can see the light at the end of the tunnel and am already feeling happier overall since I’ve gotten my debt to a manageable level.
The Amazing Calculator I Use
If you’re interested in seeing how some of these strategies could work out for you, I’d highly recommend trying out Undebt.it. This is the site I’ve been using for years to manage my debt payoff plans. You just need to enter a few details for the calculator (current balances, debt types, interest rates, payment amounts, etc) and then you can see how the different payoff methods would work for you. This calculator is what helped me realize that the debt avalanche strategy was a better method for me at a certain point during my journey.
This is just a glimpse into my overall financial journey. If you’re interested in hearing more stories about how I navigated financial situations, be sure to give me a follow to get notified when I release more articles in the future. Please feel free to ask me anything below about my journey or let me know in the comments how you’ve personally navigated debt!
