Whether your mountain of debt started with a shopping spree where you got a little trigger happy with the plastic or pursuing a fancy liberal arts degree, you’re here because you want to take a bulldozer to that mountain and finally be #debtfree.
Sitting on a big pile of debt is basically burning piles of money on the reg. For some perspective, Americans with commercial debt spend, on average, $1,300 per month on interest payments. (1)
That’s more than a lot of people’s rent, and it does nothing but keep collections at bay.
This only solution is to pay your debt off faster. This post covers how to do that in 3 different ways:
- Improving the terms of your debt
- Cutting costs
- Making extra disposable income
Let’s do this. Ranked by how quickness, sustainability, and ease, here are the best ways to get out of debt:
39. Do the math
If you’ve got $20,000 in credit card debt and you’re making $300 payments each month, it’ll be just over 12 years until you’re debt-free. You’ll have basically lit more than $23,000 on fire in the form of interest payments.
Use a debt repayment calculator like Credit Karma’s (2) to crunch the numbers and figure out exactly how long it’s going to take you to pay off your debt and how much you’ll be paying in interest.
38. Automate your finances
Self-made millionaire David Bach wrote a whole book on this one called “The Automatic Millionaire”, saying that it’s “the one step that virtually guarantees that you won’t fail financially.” (3)
Set a goal for when you want to finish paying off your debt and use the flipside of that debt calculator to calculate how much you’d have to pay each month to do that. Set up automatic payments on all of your credit cards and loans to that monthly minimum.
Recent college grads: the US Department of Education gives you a 0.25% interest discount just for setting up autopay, and many private lenders give you up to 0.50% off. (4) Not a lot, but it takes like 20 seconds to sign up for autopay.
37. Pay the maximum
A whopping 73% of Americans die in debt. A big reason is that many of them (yep, lookin’ at you) are only paying the minimum on their debt, which is the best way to stay in debt forever.
Instead, pay the maximum amount your budget will allow each month. Those courtside tickets can wait until AFTER you’ve paid off your debt.
36. The “avalanche” method
Call it the avalanching, stacking, or the ladder method, it’s all the same: hands down the most financially savvy and efficient method for paying off multiple different streams of debt.
Pay off your high-interest debts first (usually your credit cards). Set your automatic payments to the minimum on all of your cards and loans except the one with the highest interest rate: throw all the money you can at that one until it’s gone. Then target your second highest interest rate using all the extra money you have in the absence of the first debt, and so on.
35. The “snowball” method
For those who need to be coddled a little, snowballing is paying off your smallest debts first so that these little wins can motivate you to attack larger, more intimidating debts.
That initial boost of confidence that the snowballing method creates has helped people tackle $50k+ in debt in just a few years. (5)
34. Cash out your credit card cashback
If you’ve got cashback sitting around on any of your credit cards from incurring all this debt, you may as well take advantage of it.
Don’t try to earn any more cashback until you’re debt-free, though.
33. Put windfalls towards your debt
Put any random money you earn outside your regular income towards your debt.
Whether it’s a work bonus, birthday money, a holiday gift, your tax refund, or a $100 you found on the ground, directing that money towards your debt puts you a little bit closer to debt-free status.
32. Sell stuff
Don’t lie, you probably have a basement, garage, or closet somewhere that looks like an audition for Hoarders (without the dead cats, I hope). I’m not going to preach to you about the “life-changing magic of cleaning out your garage”, but I am going to preach to you about how selling crap you don’t need to pay off debt you shouldn’t have is a good idea.
31. Downgrade your stuff
Lifestyle inflation is real. People don’t like to downgrade their standard of living. But you have to if you want to double down on your debt.
This couple even sold their brand new car and got a used junker when they realized they could have used that money to pay off their debt. It probably stung a little, but they managed to pay off $52,000 of debt in just 18 months. (8)
30. Free entertainment
Instead of spending money on movies or concert tickets, seek out cheaper ways to have fun.
Look online and see what kind of free things are happening around your city. Outdoor festivals, movies in the park, all that stuff.
No need to be deathly bored while you’re climbing your way out of debt hell.
29. Garage sale arbitrage
Dig through cheap crap at garage sales, strike gold. Buy valuable items for a fraction of what they’re worth, and resell them online for a huge profit. Repeat.
Corey Levitan, a writer for Men’s Health, banks an extra $20,000 a year doing this. And he only spends 3-5 hours/week on it. (9)
28. Shop through cashback sites/apps
Cashback sites like Rakuten (10) give you money for shopping online and in-store, kinda like a delayed discount. When you cash out your earnings, put it all towards your debt. Also, use a debit card instead of a credit card when doing this unless you want to spend more time paying it off.
Don’t go on a shopping spree just for cashback, though. That’s exactly how a lot of people end up in credit card debt – cashback rewards on their credit cards.
Save these sites for those everyday purchases you have to make, like groceries or maybe clothing.
27. Buy everything with cash
Many studies have shown people generally spend less when they pay with cash than they pay with credit. (11)
Think about this: not only do you have to visit an ATM or bank any time you need cash, but watching those green bills leave your hand is more difficult than swiping/chipping/tapping a piece of plastic.
Also, you won’t be adding more to your current credit balances.
But this applies to debit cards, too. No debt involved with debit cards, but it’s still easier to swipe it than to hand over bills.
26. Keep the change
Take all the loose change you find or get back throughout the day and put it in a jar. Each month, deposit it all and use it to chip away at your debt.
25. Negotiate your bills
Anyone who tells you that you can’t negotiate bills is a liar. Everything is negotiable. According to Consumer Reports, 89% of people who try to bargain are successful at least once. (12)
Try your hand at haggling with your cable and internet bills, and then move up to the big leagues: medical bills, credit cards, and car insurance.
24. Lower your rent
Bargain with your landlord, especially if you live in an apartment: offer to extend your lease, give up your parking space, agree to show your apartment to potential renters, get some roommates, pay a few months’ rent upfront, or refer new renters for a discount.
The best time to negotiate is a few months before your lease ends.
23. Negotiate your credit card interest rate
Sometimes it really is as easy as just asking.
Time Magazine’s money experts recently did a personal finance boot camp that recommends you call up your credit card company and ask them for a lower APR. 80% of callers asking for a lower interest rate were successful. (13)
22. Don’t close credit cards
The second you pay off one credit card, you’ll probably want to immediately call up the credit card company and close it. Don’t.
Unless your card charges an annual fee, keep it open. Check the FICO 5. (14) One of the biggest factors making up your credit score (30%) is your credit to debt ratio. The less credit you have available to you, the higher that ratio, the lower your credit score.
21. Freeze your credit cards… literally
Of course, keeping your credit cards in your wallet after you pay them off is like a recovered cocaine addict keeping an old stash in his bedroom.
Stick them in a bowl of water and freeze it. Every time you want to take the plastic gods out on an impulsive shopping spree, you’ll have to wait for a block of ice to thaw while you think about your life choices.
20. Monitor your credit report
Monitor your credit report on a regular basis for any errors that could be hurting your credit score. If you see any, immediately submit a dispute to get them removed so you can nudge your score upwards to secure better interest rates in your negotiations.
19. Rent your stuff
Airbnb’s cutesy tiny houses and extravagant vacation rentals are taking over, but you don’t have to have real estate to make money renting things out anymore.
Rent out your bike/recreational gear on Spinlister. (17) Got an old bridesmaids dress or fancy tux lying around? Rent out clothing on Style Lend (18) and Date My Wardrobe. (19) Compete with Alamo by renting out your car on Turo (20) or GetAround. (21) And you can rent just about anything on RentNotBuy and Loanables. (22) (23)
18. Borrow against your life insurance
If you’ve got a permanent life insurance policy with a cash value, you can borrow from it to pay off your debt. Just make sure it doesn’t backfire. Interest rates are often lower with this method, but there are penalties involved (including burdening your beneficiaries if you die before the debt is paid off) and you could risk losing your life insurance.
17. Make every debt payment on time
No, not just to keep collections at bay. Paying your debts on time keeps your credit score as high as possible, seeing as it’s the most important (35%) of the 5 FICO credit score factors (24).
A higher credit score gives you more leverage when negotiating down your interest rates with your credit card companies. It also helps you secure a lower rate if you want to refinance/consolidate your debt, which you can learn about in the next two tips.
Also, paying on time means you avoid late fees, which are just a waste of money.
16. Refinance your debt
If you qualify for refinancing, you should 100% do it. Basically, you get a new, better (lower interest, usually a personal loan) loan to replace one of your old (higher interest) loans. You can cut years off of your repayment schedule by refinancing.
Pay attention to the term length of the loan you’re refinancing your debt with, though, especially with long-term debt like mortgages. Let’s say you have 5 years left on a 30-year mortgage. Refinancing to a lower interest rate will lower your payment, but you’ll end up paying thousands more in interest.
15. Debt consolidation
Consolidating debt is simply combining multiple debts into one debt by taking out a lower interest loan. Most of the time, consolidating your debt also involves refinancing your debt (see previous tip) – especially if you have several high-interest debt sources.
In addition, you can spend less time juggling 5 different debt accounts and making sure to pay everything on time. Less chance of incurring late fees or worse – the wrath of collections.
If you’ve got debt from more than 2 different sources, you should definitely consider a debt consolidation loan.
14. Balance transfer credit card
Live-saving credit cards exist: they offer a 0% interest rate for a specific “introductory period”, which can be 6 months, 12 months, or even 21 months. You transfer your debt to this card and pay it off interest-free.
Just make sure you pay it off in time, and don’t use it to spend.
13. Loan forgiveness
If you’re a teacher, public servant, permanently disabled, Peace Corps volunteer, nurse, or law enforcement and you have student loan debt, the government might actually pay it off for you.
You don’t get away scot-free, though; these programs usually require you to make 120 qualifying payments (aka 10 years of monthly payments) before you’re considered for loan forgiveness. Check out the Federal Student Aid website for details. (27)
Whether or not you’re forgiven for your gluttonous spending on a metaphysical level is another matter.
12. Have a small emergency fund
If you don’t have some cash set aside for emergencies, you’re going to incur more debt if you get into a bad car accident or something similar.
It doesn’t have to be a lot – $1,000 should be enough for the moment, and you can build it up in increments of as little as $50 a month if you need to.
11. Quit investing
Here’s the thing: paying down debt gets you a guaranteed return (in the form of interest you no longer have to pay), and that return is almost always more than you’d earn on the stock market and always more than you get from a savings account. (28)
Drop the investments for now and put any savings in excess of your small emergency fund toward being debt-free. Not only that, but consider selling some investments and putting the proceeds towards your debt.
10. Become a digital nomad
It’s no secret that I think working from home is the future, and I’m not alone. (Wall Street Journal, Forbes, and Fast Company all agree). (29)
“Digital nomads” have traded in the 9-5 for a digital career that lets them roam the globe while they rake in cash. Aside from the obvious perks – from showing up at the “office” in your swim trunks to your “office” being a tropical island – you can also save tons of money by living somewhere cheap. The cost of living in Thailand is half what it is in the United States. Think about it. (30)
9. Gig economy jobs
Drive for Uber, doing odd jobs on TaskRabbit, shop for people with Shipt, you get the idea. These aren’t the most glamorous ways to make some extra cash, but money’s money and these jobs aren’t too hard to sign up for.
8. Teach a skill for pay
Monetize a skill you have by teaching others how to do it. Know how to play the guitar? Give private lessons. Excellent at a language? Find a language tutoring site and sign up to tutor others.
Even better, make an online course or eBook that teaches your skill for some passive income. Just make sure the content is actually useful.
7. SEO consulting
If you can learn a thing or two about SEO and find a company that would like to improve their SEO (every company), you can rake in enough side money to be out of debt asap. Entry-level SEO Consultants make about $50,000-$60,000/year…with no experience. (31)
6. Be a Virtual Assistant
If you don’t have time to learn technical skills, Virtual Assistants can make money doing any odd job that remote workers need help with, from making phone calls to making Pinterest boards. Find gigs on Upwork – according to them, Virtual Assistants are one of the fastest-growing freelance positions. (32)
5. Content writing
Can you put together a well-written sentence? Know how to capture an audience with some well-crafted words?
Content is still king, and writing it pays well too because you can’t outsource it to just anyone (we see you, wannabe internet companies trying to get away with hiring amateur Malaysian teens to write your blog).
Freelance writers can make anywhere from $30 to $70 an hour. (33)
4. Facebook ads
There are over 25 million businesses using Facebook to market themselves. (34) That’s 25 million potential clients if you know how to run a successful Facebook ad campaign because many business owners are completely clueless when it comes to social media.
Brush up your skills and start offering to do Facebook ads consulting to small businesses in your area.
3. Open an e-Commerce shop
If you want to reel in the side money, this one takes some time to build up, but it’s passive, which you know I love. E-commerce is projected to make up about 13% of all sales this year, and it’ll be up to 17% just 5 years from now. (35)
Make something and sell it. Even better, find yourself a dropshipper and cut out most of the work. Either way, get a piece of that pie.
2. Learn to code
The national average salary for a computer programmer is $84,360. (36)
Combine that with the fact that this job is 100% digital, and you’ve got a recipe for success. Imagine living on a Caribbean island where you can live comfortably on $1,200/month while you’re raking in $7,000/month. Your debt will be gone in no time.
1. Provide leads online for local businesses
Nothing out there beats raking in hot leads for local businesses. You might as well be handing over stacks of cash to these companies, so trust me when I say this: small businesses pay good money for leads.
Plus, local lead generation hits the money-making trifecta: it’s remote, scalable, and automatable. Plus, you’re cutting down on the competition by focusing on local areas.
TBH, it doesn’t really matter whether you stack your debt, snowball your debt, avalanche your debt or any other fancy terms that basically just mean paying off your debt.
Unless you want to spend the next 50 years of your life picking away at a mountain of debt with a toothpick, you need to do more than stop buying pumpkin spice lattes. You need to increase your earnings fast… local lead generation is your bulldozer.