Debt payoff – Have you tried and tried to get out of debt, only to find yourself making a bit of progress but then sliding back to where you started?
Just like losing weight successfully means making lifestyle changes that change your underlying eating and exercise habits, paying off debt requires serious lifestyle changes, too.
If you are used to putting everything on a credit card and carrying a balance month to month, you have to change your habits and change your mindset before anything can change in your debt payoff.
What’s stopping you from being debt free? Once you cultivate these debt payoff habits, you’ll be ready to pay off your debt once and for all.
Debt Payoff Habit #1: Be Honest about Your Current Situation
People who are debt free know how much money they have and how much money they make. Can you say the same?
To get out of debt, it is necessary that you open your eyes to your financial situation as it stands today. That means putting aside for the moment the possibilities you hope for, the things you wish you’d done, and the achievements you think you’re capable of.
You lied to yourself when you took the debt – you told yourself you deserved something. You told yourself you needed something when you just wanted it. Or you told yourself you knew what the future would hold.
You must become honest about your debt. You must know your income today and your bills and credit balances today.
You must make your debt-free plans based on the reality of your income and outgo TODAY. Without brutal honesty about where you are RIGHT NOW, you will be unable to pay off the debt.
And along the debt payoff journey, you must continue to be honest when you spend off of your debt free plan.
Debt Payoff Habit #2: Get Comfortable with Discomfort
Paying off debt is not easy, mentally or even physically. After all, that’s why you got into debt in the first place, right? You didn’t have the money at the time and you wanted or needed something. That was uncomfortable, and you chose to borrow money from the future in the form of credit.
It will not be comfortable to pay off debt. You may need to sacrifice time with friends or family. You may need to put your wants on hold in favor of paying off debt. It will be uncomfortable to make choices based on finances.
Sure, you can begin to learn how to pay off debt and make your debt payoff manageable so you can still live your life while you do it. You may choose a slower debt payoff path that reduces discomfort somewhat.
But ultimately you will have to sacrifice to pay back what you owe if you ever want to be free.
Debt Payoff #3: Track Where Your Money Goes
If you’re a free spirit accustomed to just spending what you have in your checking account, it will be difficult to get out of debt unless you learn to track where your money is going every month.
People attempting to lose weight lose more when they log what they eat. Just the very act of writing something down (or using an online journal) forces you to evaluate every decision you make about your finances.
My favorite way to track spending and create a debt free plan is You Need a Budget (YNAB), a budgeting and expense tracking software product. I’ve personally been using YNAB for 5+ years. I’ve used it for business and personal accounts, and what I love about it so much is that it forces me to account for all of those random expenses I used to forget about – and then put on my credit card. The YNAB team also offers a ton of training videos to help you budget and plan for future expenses more effectively.
Personal Capital is another smart way to track and manage your finances. Over 1.4 million people use Personal Capital to track over $350 billion. That’s a lot of people and money. It has award-winning financial tools (that are FREE) to easily manage your entire financial life in one place.
You can get started with a FREE Personal Capital account here.
Debt Payoff Habit #4: Plan for the Future
It’s all too easy to fall into debt. But getting out of it – and creating more income and more savings for yourself requires starting your financial plan and sticking to it.
Planning for the future is a habit you’ll have to learn when you’re paying off debt. It can be overwhelming, but creating a financial debt payoff plan is easier if you break it into steps:
- Identify your end goal. You might want to pay off your $40,000 student loan, clear your credit balances, or be debt free including the mortgage.
- Figure out how to reduce your expenses. You’ll need clarity on the money you make each month as well as what goes out. Then start cutting – you might be able to substitute Netflix for cable TV or Aldi groceries for Whole Foods, for example.
- Create a debt payoff budget that includes your new reductions.
- Track your spending daily and once a week or month, evaluate how you’re measuring up to your goals.
Debt Payoff Habit #5: Do It Yourself
During the debt payoff process, every cent that you can throw at your balances is important. Learn to DIY will give you more leverage against your debt and free up cash to pay down your balances.
If you outsource housecleaning, you could give up a night of TV to clean your house yourself. If you pay someone to mow your lawn, doing it yourself could save you hundreds in a month that you could throw at your debt payoff plan.
Debt Payoff Habit #6: Start a Side Hustle
One of the best ways to speed up your debt payoff is to start a side hustle. Increase your income, and the extra can be used to pay off debt quickly.
One of my favorite side hustles is to start your own moneymaking blog. Unlike a regular job, there’s no limit to the amount you can earn to pay off debt.
When it comes to debt payoff jobs, blogging has the potential for great financial gain compared to other side hustles. You can make thousands or even tens of thousands of dollars a month blogging. And there is a very good chance you will earn money with blogging if you get your blog set up the right way and commit to consistently writing quality blog posts.
The best news for those in debt? Blogging is low-risk and doesn’t have to cost a lot to get started. Your out-of-pocket costs will typically be less than $10 a month (I use a company called Bluehost to get started with blogging). You can do it in the evenings after work or at home if you’re a stay at home mom.
In fact, I can’t think of too many other side hustles that offer this much potential for reward for expenses of less than $10 a month!
For more about side hustles to pay off debt, check out 15 Ways to Pay Off Debt Fast.
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Debt Payoff Habit #7: Expect Setbacks
Even with a plan in place, there will be setbacks to your debt free journey. You’ll lose a job or a pet will get sick or you’ll have to fly across the country for a family emergency. If you have the knowledge that things won’t go exactly according to your debt payoff plan, you are likely to be less hard on yourself when things go sideways. They will.
But every step you take forward is one toward being debt free and having financial freedom.
What money mindset habits did you develop to help pay off debt? Let us know in the comments!