10 Ways I Am Paying Down My Debt Faster- And You Can Too

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Ellan vacationing in Newfoundland.

By: Ellan Dickieson, Family Service PEI

Do you ever imagine what your life would be like debt free? I know I certainly do! How many times have I thought, “If I just had $20,000”?

Paying down debt is hard work; it takes patience, perseverance, discipline and intelligence. As someone who is working very hard to pay off debt (most of which comes from a graduate degree obtained while living in a big city) I want to share some tips that have worked for me. It is my hope that my honesty will help you.

That being said, I realize that there really isn’t any one “best way” that works perfectly for everyone, and what worked for me may not be applicable to you. Hopefully within my ten suggestions you will be able to consider a few. The more of these you can apply, the faster you will get out of debt.

1. Suck It Up and Go Work

I realize I am starting harshly, but any amount of money is better than none! When I moved home I was under the impression I had the education to obtain a well paying government job. To say the least, it didn’t pan out. It took me 10 months to get a job in my field. In the meantime, I went to work for $12 an hour, working 12-hour night shifts in a home for the elderly. Although I loved the residents and I cherish my time spent with them, it was not a job that matched my qualifications. At times I was embarrassed to even tell people where my graduate degree had gotten me, but at the end of the day that pay cheque sure looked a lot better than nothing! You have to find a way to generate income (legally)- even if it is taking a job you are over qualified for.

2. Prioritize Your Debt: Pay Off Your Most Expensive Debts First

Upon my return home I had credit card debt and three sources of student loan debt, all with varying interest rates. I prioritized these debts based on interest rate. I chose the debt that was charging me the most interest (credit card 20%) and focused my extra payments on paying that one off first, while continuing to make minimum payments on the others. Once my first, most expensive debt was paid off I started to focus on the next most expensive debt (Federal student loan 5.5% interest rate).

I will continue this method until each of my debts is paid off, with the Provincial student loan, sitting at 0% interest rate, being last as it is the least expensive. This strategy can help get you out of debt quickly, and you will feel encouraged as you knock off one debt at a time.

3. Pay More Than the Minimum

Once you have prioritized how you are going to repay your debts, make sure that you always pay more than your minimum payments. If you only make your minimum payments each month you will be running on a treadmill; it can take forever to pay off your balance.  If you want to pay off your balance quickly, pay as much extra as you can afford. Even an extra $50 each month will help. I spent a lot of time using financial calculators to see how quickly I could get my debts paid down. I would suggest you do the same.

4. Spend Less Than You Plan to Spend

Like most young professionals, I wanted to get my own place, decorate it nicely, travel, shop, dine out…the list goes on and on. The harsh reality is that most of us have wishes and wants that are bigger than our pay cheques. Many people get into debt and stay in debt because they tend to buy what they want, not what they need. Instead of my own place, I settled for moving in with someone else. Not only did this save me a ton of money on rent, but I also didn’t have to furnish or decorate the place. Although I don’t have a place to call “my own” I do have new friendships that will last me a lifetime. Try to think about what you could do without. Sometimes living without can be a blessing in disguise.

5. Buy a Quality Used Car Rather than a New One

To be honest, some of the worst debt I see is vehicle debt. The reason being, when you purchase a new vehicle the value decreases the minute you drive off the lot, and if you are having difficulty keeping up with the payments your options for getting rid of the debt are limited. You can save yourself thousands of dollars if you buy a quality used car rather than a new one. I got lucky; my elderly neighbor was selling her vehicle and 2 years later, knock on wood, it hasn’t cost me a cent. I cannot begin to describe how nice it is not to have to make a car payment every month!

If you live in an urban area you may be able to forfeit a vehicle altogether, or cut back to a 1 vehicle household. Not only will you be saving money, you will be saving the environment and increasing your activity by walking or biking!

6. Create a Spending Plan & Track Your Spending

You should have an idea of how you plan to spend your money. I prefer to look at how much money I take in every month, and how much I think I will spend. I simply write down all my known fixed monthly expenses (rent, car insurance, debt payments) and then estimate my fluctuating expenses (gas, groceries, entertainment). The key here is to make sure that I am spending less than I earn. The other key is to see how much I have leftover, and decide what I want to do with it; pay extra on debts, save for emergencies, a vacation, or all three.

Planning is great- but saying and doing are two different things. That is why you need to track your spending. (Insert blank look here). I get it; it’s not exactly something to jump up and down about. However, doing this can save you almost as much money as working a part time job.

I don’t track my spending all the time; that would just be torturous for me. To keep my money mind happy, I track my spending about 2-3 months a year. This allows me to see if my spending is in line with my budget. Do I really spend $200 a month on gas and $200 on groceries?

I prefer to use an app on my phone, however a notepad can work just as well. Be sure to adjust your spending plan based on your tracking results. Should your personal circumstances change (new job, living arrangements, baby) be sure to track at that time.

7. Save on Food

I don’t cut out coupons, make meal plans, read the flyers regularly or grocery shop at Mom’s house (not saying I haven’t or won’t again someday). I do cook food at home and try to avoid eating out for convenience. I don’t buy a coffee in the morning. I make big pots of soup and chili and put them in the freezer. I go to Costco and stock up on the necessities, and I share/split bulk items with others. I pick up the flyer when I walk into the store and do tend to buy things that are on sale.

There are numerous ways to save on food, simply visit Pinterest. Some require a little effort; some require a lot of effort. Find a happy medium that works for you. I don’t expect to see you on the next episode of Extreme Couponing.

8. Get a Second Job and Pay Down Your Debt Aggressively

I often get asked why I would want to work a second job. My answer: Because I can, and someday I may not be able to, or won’t want to.

If you have the time and ability, taking on more hours, or getting a second job could be your key to financial success. I teach fitness classes as my second job. It rocks! There are far greater benefits than simply the pay: I get to help people, I get paid to workout, I meet people, I get a free gym membership…the list goes on. Do you have a hobby that you could turn it into cash? This doesn’t work for everyone, but if you can make it work, you could be debt free faster.

9. Get Creative with Vacations

I know I should be telling you to completely cut vacations, but nobody wants to do that, including me. So instead, I encourage you to vacation on a budget. For me, this looked like adding pleasure to work trips. I was fortunate to get to travel to Ottawa, St. John’s and Vancouver for work in the last few years. Each time I tacked on extra days and was able to visit friends/family and tour the area. I also suggest vacationing where you have friends/family you can stay with, as accommodation can often be one of the biggest expenses. I have also chosen to take many smaller vacations in the Maritimes, close to home, which usually involve the less expensive option of camping. It is amazing how many great vacations are waiting in your own backyard!

10. Find Free Money

Yes, there is such thing as free money! Are there grants that you can apply for, whether it is to do renovations to your house, or to pay down your student debt? What costs would your employer be willing to cover? This may include your work gear, cellphone bill, travel expenses, professional fees/dues or first aid training. Would they be willing to contribute to a retirement savings plan? Some employers will agree to match your contributions up to a certain amount. All of these things are what I call- free money. You MUST take advantage of all the free money you can get!

As mentioned, what is working for me may not work for you. A good first step is to meet with a Credit Counsellor. A Credit Counsellor will be able to review your financial situation and provide you with additional options to help you get out of debt faster. This may include a consolidation loan, refinancing your mortgage or a debt repayment plan, amongst others. At the end of the day what is important is that you feel in control of your debt and you have a plan for getting it paid down as quickly as possible.