This post may contain affiliate links. This means I may receive a small commission at no extra cost to you.
The best 5 tips to paying off debt in 2022
“The average U.S household with debt owes $155,522, or more than 15 Trillion altogether, including debt from credit cards, mortgages, home equity lines of credit, auto loans, student loans and other household obligations – up 6.2% from a year ago.” – cnbc.com
Read that paragraph again and let it sink in. It is an outrageous amount of money that Americans owe, and that debt grew and grew as many lost their jobs amid the events that took place in 2020-2022.
I am one of those Americans, I hate to be part of the statistics, but it is my reality and I am sure if you are here, reading this is because it might be yours as well.
This post is all about how to pay off debt fast, the best tips to set up a debt payment plan from someone who is currently doing it.
My total debt as of today stands at $99,993, and that is composed of student loans and two personal loans I had to take out to keep afloat as I lost my job at the start of 2020, and I was unemployed for nearly 18 months.
Even thinking about it and putting myself back in that time, I can’t believe our family survived that long with such little money.
Anyways, I think it is important to understand and give yourself some grace, we are all in different financial situations, and journeys, and we got to this point because the majority of us needed to in order to survive, keep a roof over our heads, and eat.
At the start I only had $47,000 in debt for my student loans and that did not feel so stressful or impossible to one be debt free.
But life happened and I needed to do the responsible adult thing and figure out a way to maintain the means to provide the necessities to my family.
And so, as of June 2021, I started to learn all about personal finance, hours of YouTube videos, Google searches, blog readings.
Sometimes it was 2AM and I was frantically trying things like how do I set up a payment plan for debt, what are the biggest strategies for paying down debt.
I also started to search for debt payment calculators, debt payment strategies from people who have actually paid off debt relatively quickly, heck sometimes I even searched how to pay off debt with no money.
Well, I finally landed with the question of the year, creative ways to pay off debt.
And that is when some thoughts came in about starting a side business as side from my 9-5 office job.
Because although I earn a pretty nice salary, it was not going to be enough for me to get out of debt as fast I wanted to.
I was already creating content on social media, but I had no idea I could make extra income from that. Although I am not making much, it is an average of $300 per month, it is something I can chip away at the debt.
And most importantly, I knew something had to change, I was making the most money I have ever made in September 2021, but I always would go at the end of the month and ask where did my money go?
That is when I seriously started to consider creating a budget.
I was always scared to create one, because I find them to be restrictive, and life with two small children is unpredictable. But just the thought of continuing to feel like I was drawing in debt and there was no way out was even worse.
So I started to do what I do best, RESEARCH!!!!!
I seriously researched all types of budgets out there, and tried them all in the span of three months. Today I use a combination of a few to make it work for my family.
And by doing this I finally knew where my money was going, groceries, amazon, and miscellaneous *The problem here is that most of those shopping habits (aside from food) were things I could not even remember buying or using.
After learning this, I immediately went on a “not buy month” where I only spent money on things I actually needed, like utilities, bills, etc.
That month alone I was able to see $1600, can you believe that? $1600!!!!!!!!! So I took that money and put it towards debt. Now, although I am still paying off the debt and I plan on paying it off in 18 months.
Let’s create a debt payment plan together that can also serve your situation.
That is what I created for myself, and here are the best tips, hacks and tools I found the most helpful as I was setting up this plan to pay off debt fast, without sacrificing a somewhat comfortable lifestyle.
First let’s understand what could constitute debt – debt is referred to as an amount of money borrowed/owed by one party from another.
There are different types of debt:
- Student Loans
- Car Loans
- Credit Cards
- Personal Loans
- Back Taxes
- Medical Debt
- Mortgage Loans
Something else that is extremely important to point out is that before you think of creating a plan to pay off debt, you must understand that amount you owe, how much interest each of those accounts are collecting and what are the minimum payments on each account.
For the longest time I chose to ignore my debt. I always made minimum payments, and for years I did not know how much I owed.
Taking a look at all of my debt was a mentally draining day, but it gave me perspective and helped me put a plan together so that I no longer have to worry about owing anyone anything and my plan is to get it taken care of in 20 months, yes that sounds aggressive, but doing it this way guarantees I can move on to other plans in my financial journey.
Now, with all those disclaimers out of the way let’s jump into my top 5 tips to creating a plan to paying off debt.
1️⃣ Have a budget – not having a budget has cost me for a long time, it is important to know that you are not spending more than you are making, because that is going to keep you in debt for longer. Contrary to popular belief having a budget does not need to be restrictive or cut out all the fun in your life, it is simply a method to track and give your money a job that will benefit you for your money goals.
2️⃣ Cancel/lower bills – I saved close to $500 a month by calling some of my service providers and ask to have a lower bill (some companies run promotions and are able to give you a discount), I switched phone providers and there alone I was able to save over $100 per month, that is extra money I can throw at my emergency fund or my debt payment. I also canceled some subscriptions I was not using as often or did not see much value in, like spotify, I know people pay because you have tons of options and you don’t have to listen to commercials, but it was not justified for me to spend $10 dollars a month for a service I was only using once or twice a month.
3️⃣ Make a list of all your debt – This goes hand and hand with the budget tip, knowing how much you owe and how much interest is being accrued the more money you can save long term. For example, my student loans are currently at 6.2% interest rate but my personal loans are at 11%, which means that I will try to tackle the personal loans first since I will be saving a lot of money in interest rates alone by paying off that debt faster.
4️⃣ Create more money – Sometimes it is hard to put any extra money beyond the minimum payments with just one paycheck coming in, which is why it could be helpful to find ways where you can make more money, and that extra cash can be put to use towards you achieving your financial goals faster
5️⃣ Lower your interest rate – Refinancing can be an option especially if you have a decent credit score, again the amount of money you owe probably won’t change but if you can lower the amount of interest you need to pay while making your monthly payments, depending on how much your loans you could end up saving thousands of dollars a year by lowering your interest rate.
By now, you have a soft idea of what a plan looks like to pay off your debt, let’s now break down the types of methods you can use to pay off your loans. Remember there is no wrong or right way to do this and one method is not better than the other. This is going to depend a lot on your situation and future money goals.
Here are some common debt payment methods that can help you solidify your plan to becoming financially independent:
❄️ Debt Snowball this method is one I recommend if you like to have the extra motivation to keep going on your debt pay off journey by paying off the smallest amount of debt first (you will be paying the minimum amount on the others), then once that small account is taken care of you take that money and put it towards the next line of debt.
😯 Debt Avalanche here you dedicate to paying off the debt with the highest interest rate while paying the minimums on all others. Then you tackle the next highest and you go down the list until everything has been paid off. This is the method that will end up saving you money on interest rate in the long term.
🔄 Balance Transfers there are many credit card companies that allow you to transfer over debt from another creditor, the only way I would personally do this is if the new creditor is able to offer introductory APR, so that I don’t have pay interest on that money for a certain amount of time and the payments being made will be allocated towards the principle balance. For this method it is very important to do research, make sure you are not putting yourself in a worse position than you are currently.
😎 Management Plan with a Professional Sometimes we need help, and that is ok, when I was first trying to tackle the best way to get myself on a plan I was extremely overwhelmed, and at times felt like I was taking on a very difficult task. I decided to hire a personal finance advisor to help understand the best method to start tackling my debt and maintain my lifestyle. I know some might not be able to afford a financial advisor but there are non-profit organizations that provide services for people that qualify.
And that will take us to the end of this post. I hope this has served you in the best way because I am sure this is the right place if you have ever wondered the following:
- Is there a way to get out of student loan debt
- How much debt is America in
- Get rid of student loans and other debt fast
As always please leave your comments and questions below, I read every single one. If you have suggestions on future posts I am happy to take them into consideration.
This blog post was all about how to pay off debt in 2022. In this post I revealed the most effective and tried strategies I implemented to create a plan that I can use to finally become financially independent.
DISCLAIMER: I AM NOT A FINANCIAL ADVISOR. INFORMATION FOUND ON THIS SITE IS AN OPINION BASED ON MY PERSONAL EXPERIENCE AND SHOULD ONLY SERVE AS EDUCATION, AND NOT PRESCRIPTIVE ADVICE. PLEASE CONSULT A FINANCIAL ADVISOR.