Let’s face it, being in debt isn’t fun, but for many of us, it’s not a choice. We wanted to go to college and had to take out student loans, we got hit with an unexpected medical expense, or we had to put expenses on a credit card for whatever reason.
No matter the reason you’re in debt, you’re in it. So let’s create a plan to pay off your debt and be free from it once and for all.
After reading this post, you’ll learn:
- How to reduce your loan’s interest rate
- How to reduce your expenses where it makes the biggest difference
- How to increase your income or salary
- How to choose a debt pay off method best for you
- Resources and tips for staying debt-free
Before we get started, make sure to sign up for my free resource library and get tons of free printables to help change your financial life.
How To Pay Off $10,000 Debt In 1 Year
Break down the amount you’ll pay off each month
$10,000 in one year sounds like a lot (and it is). For some people it may seem as if it’s not even achievable. Let’s break down $10,000 across 12 months.
$10,000 divided into 12 months is $833 per month. Let’s find a way to save or earn an extra $833 to pay off $10,000 by the end of the year.
Reduce expenses in the easiest areas first
Use Ibotta. Ibotta is a free app that gives you cash back shopping online and in-store. The average Ibotta user earns $150 a year just for doing their regular shopping. It’s a no brainer to use it and in my opinion, actually worth using because of the savings for each product. You’re not just saving like 10 cents on a product, instead, on many items you’re saving dollars.
Raise your deductible. I raised my deductible by a few hundred dollars for my dogs pet insurance and we are saving about $10 a month. Since we raised the deductible, we put in extra money in our emergency fund in case anything happens. Talk to your insurance agent about how much money you can save if you raise your insurance deductible.
Buy items that are reusable so you only have to buy them once. For example, you can buy reusable baking mats, menstrual cups, safety razors, and paper towels. I even DIY my paper towels by cutting up old bath towels we no longer use. We use the DIY paper towels, throw them in the laundry, clean them, and reuse them as paper towels again.
Keep maintenance regular on your home and car. Doing this makes sure you’re limiting the number of things that break down and need repairs. Since we have a house, we follow a monthly home maintenance plan that checks over certain things around the house each month of the year. For example, every month we clean the garbage disposal, test smoke detectors, and deep clean our oven. A couple of times a year, we check for exterior damage, check the roof, trim trees, and many other things.
Talk to Billshark about negotiating your monthly expenses. Billshark can lower internet, cable, TV, satellite radio, and many other bills. Billshark lowered my internet and cell phone bill and saved me $290 in one year. You can also try to negotiate your bills on your own without Billshark, but I’ve personally had no luck doing that.
Use Honey. You can stop searching for coupons because Honey finds the best coupon for you automatically. Honey is a browser extension that you download once. Any time you go shopping online, Honey will automatically give you the best coupon for your purchase. If you’re not using Honey, you’re leaving money on the table.
Cancel subscriptions. Billshark can help you cancel and manage subscriptions. You may even score some cash for unused subscriptions.
Meal plan. When you don’t have a meal plan in place, you make last minute convenient decisions that tend to cost more. Use a meal planner (they’re free in my free printable library) or an affordable meal planning service like $5 Meal Plan. $5 Meal Plan sends you a meal plan and shopping list every week for just $5 a month. Get a 2-week free trial of $5 Meal Plan here.
Buy generic. Buying generic items at the store can save you a ton of money for the same item.
Use Ebates. Ebates gives you cash back for shopping online on thousands of sites. Sites include: Amazon, Best Buy, Ulta, Macy’s, eBay, Target, Kohl’s, and so many others. Any time you make an online purchase, you get a percentage back with Ebates. Get $20 when you sign up for Ebates here.
Maximize insurance discounts. Most insurance companies will give discounts for clean driving records, putting a beacon on your car to monitor your driving, and combining insurance policies. Talk to your insurance agent to find out how you can save more money. I save about $100 a year just for installing a State Farm beacon on my car.
Reduce your credit card’s interest rate
This applies to credit card debt only. Do you know your credit card interest rate? If not, you can find the interest rate on any credit card statement.
The average credit card interest rate is about 20%. Lowering the interest rate can potentially save you hundreds if not thousands of dollars depending on how much debt you have. You can lower your credit card interest rate with the help of this script here. You basically call your credit card’s customer support and tell them you’ve never missed a payment and you’ve been a long time customer.
If they say no, consider transferring your credit card balance to a 0% APR card. This comes with important things to think about, such as you have to pay off your remaining balance in a certain amount of time (each credit card is different). So if you decide to transfer your credit card debt to another credit card, make sure you know of any special rules for the new card.
Increase your income or salary
This is where you’re really going to make a difference in your debt. The reality is that you can only save so much money. There comes a point where you have to make more of it to really make a difference in your debt.
Here’s a list of ways to make money with a side hustle:
- Creating an Etsy shop and selling printables
- Becoming a Pinterest virtual assistant and helping businesses succeed on Pinterest
- Working as a Facebook ad manager and creating high-performing ads for small businesses in your city
- Work from home as an online English teacher to children in China
- Starting a blog that helps people around the world
- Run an Amazon FBA from home
- Fill out surveys and earn gift cards
- Become a freelance proofreader
- Flip items for profit as a flea market flipper
- Help a business by working as a virtual ssistant
- Become a freelance writer and write for large publications
- Becoming a remote bookkeeper who helps small businesses
You can also increase your salary by asking for a raise. Asking for a raise isn’t easy, but the worst that can happen is your boss says no. Besides negotiating your salary, you can also ask for an end of year bonus, more paid vacation time, education stipends to further skills, telecommuting options, stock options, and health insurance. Anything helps.
Maybe you don’t like the side hustle you originally picked – pick a new one. I had 4 different side hustles in college and it was so worth it.
Manage your money
Once I started following a plan for how I was going to spend my money, A.K.A. budgeting, that’s when I started seeing a big difference. Before budgeting, I was spending money without a plan. I always thought I was doing just fine with my spending. Then I saw how much I was spending in different categories like groceries and entertainment. It was a reality check.
I’m not a penny pincher by any means and maybe you don’t want to be either. That’s not the point of budgeting. You’re creating a plan for your money.
I tried every single budgeting method until I found a method best for me (which is using the EveryDollar app). I tried cash envelopes, a budgeting planner, budgeting excel sheet, and even a printable. My all-time favorite method is using an app because apps can automatically upload your purchases and expenses and all you do is drop them into the appropriate category.
Here are a few ways to budget:
- Budgeting planner
- Budgeting app (Mint, YNAB, EveryDollar)
- Cash envelope system
- Budget printable
- Excel sheet (create your own)
Put any extra money toward debt
This includes tax returns, work bonuses, cash gifts, and even stimulus checks. Any time you receive extra money, be very intentional. This is a great time to throw all the money to your debt so you can reach your goal faster.
Choose a debt pay off method
There are 2 different popular debt payoff strategies: the interest rate method and the balance method.
The interest rate method works by you paying off your highest interest rate debt first and going in that order.
The balance method works by paying off the credit card with the smallest balance and working your way up from there.
For example, let’s say you have 3 credit cards with $500 at 22% APR, $1,000 at 20% APR, and $250 at 24% APR.
Using the interest rate method, you’d pay off the highest interest rate first. So you’d pay $250 first, then $500, then $1,000.
If you used the balance method, you’d pay off the credit card with the smallest balance first. This is to keep you motivated because you’ll pay off debts “quicker”, meaning fewer credit cards with debt. You’d pay off $250 first, then $500, then $1,000.
Once you’ve paid off your debt, you’ll acquire a new set of financial skills. I love that I was in debt at one point because it helped me learn how to manage my money and pay attention to it. Now I have the skills to pay off debt quick and responsibly in case I ever get in that situation again. The same goes for you.
Once you pay off your debt, you can work on money goals like:
- Contributing to a 401(k) and/or IRA
- Start a business
- Save up for a car to buy in cash
- Increase your credit score to 750+
- Save for a vacation in cash
- Take care of your health (to lower your chance of medical bills)
- Creating a beefy emergency fund
Are you working on paying off debt? Do you have a plan in place? Share any tips in the comments below!
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