How to pay off debt (and not go crazy trying)

Becoming debt-free seems like a far off fairy tale to many people today. But in this post, I’m going to show you exactly how to pay off debt and get on the road to financial freedom.

As a young college student, I had no idea (like most) what accruing debt really meant. When I graduated with over $20,000 in debt I still didn’t quite get it.

Years later when I had a family and a house, two car loans, student debt, and medical debt the weight of accruing all that debt finally hit.

At this point, my husband and I had a one-year-old daughter and all I wanted was to be able to stay home with her. But it just wasn’t possible because of the stupid debt.

We finally made the decision for ourselves to work toward being debt-free and live life differently.

This post will take you through every step that we took to set a strategy that ended up in us paying off $32,000 in debt in one year. That was literally half of our income at the time.

How to live on one income (even if you think you can’t)

Think about why you want to be debt-free

Obviously, no one really wants to be in debt. But the first real step in this process is to always remember why you want to be debt-free.

Do you want a new house? Do you need to rid yourself of the stress of money? Do you want to travel? Stay home with your kid?

Ours was pretty simple. We wanted the freedom to do more things with our family and make lasting memories.

This doesn’t mean expensive vacations. But it did mean being able to spend less time working and more time together.

Knowing the reason behind why you are trying so hard to be debt-free will help you stay motivated along the way. Being determined to pay off debt is more than half the battle.

Make a budget to pay off debt

The first and most important part of our journey was making a budget. When you make a budget to be debt-free, it needs to be as bare-bones as possible. Only the things you have to pay for need to be set in stone.

Go over your budget with a fine-tooth comb. Where can you cut costs? Cable? Subscriptions?

Anything that isn’t a need needs to go. Another aspect of this is cutting down your budget in areas that you shouldn’t be spending as much as you currently are.

Typically this is going to be eating out, groceries, and entertainment.

This is where mealing planning and determination are going to be your best friends.

If you really want to cut costs I encourage you to check out my class Food Budget Overhaul. It has all my best strategies for saving money on food and meal planning.

Using these methods I cut our food budget by $400 in one month!

Mapping out payments

We spent an entire night searching for software that would help us map out a payment plan.

Most of the sites we did find that would make a plan either didn’t save any info so you’d have to put it all in again every time, others that had restrictions due to paywalls, and some that were just so hard to use you knew the information was there you just could not find it.

Finally, after I went to bed that night Josh ended up finding undebt.it. Undebt.it does everything we wanted it to do and more.

It even includes a handy feature of changing which way you’d like to tackle the debt and what difference it would make in time, money spent, and interest rate.

Not to say it is not without its problems, I’ll be the first to admit it is a little unpolished.

There are a few different methods for paying off debt:

Snowball: The snowball method is where you start paying off your smallest loan first with ALL leftover money you have that month. This snowball amount will eventually grow as each debt is paid off.
Avalanche: This method is exactly the same concept as the snowball except you start off with the highest interest rate loan first.

I’m going to be honest here. I think the Snowball is better because you stay motivated when you feel like you are paying off debt quicker. With the Avalanche method you could very well end up paying off your biggest debt first, which can easily dampen your spirits.

After inputting all of our loans and the amount of money we could feasibly put towards them each month we settled on a snowball plan that would set us up to have ALL our loans paid off, including our house, in 2024.

I swear my jaw dropped. Eight years is all it would take to pay off our loans and a mortgage of over 100K.

Honestly, I’m not even that worried about paying off our house, it’s all the other debt that really eats at me.

Obviously, you have to include a margin of error here, random expenses will always pop up. This also didn’t include if Josh or I got a raise, or made extra money on the side.

After seeing all of this we were both so motivated to go forward, and in the back of my mind, I knew that completing something like this was something to be celebrated.

You can grab my free budget and debt tracker below to start making a monthly budget and finding out what your snowball will be!

Setting Goals

That is where the last part of our plan was born. After we pay off each loan we are getting prizes, most of them we have already set. Here are some examples to inspire you:

Going out to dinner at a fancy restaurant
Taking one day to do whatever we want and spend whatever we want
Take a day trip to Nashville
Remodel a room in the house
Take a trip to Disney

Each of these was correlated with a smaller or bigger loan. So after we paid off a $1000 school loan we were able to go out to a nice restaurant, and when we pay the very last loan off we are going to Disney.

I know this may sound counterproductive, spending money when you are trying so hard to pay off debt. But I really believe that this method made all the difference in us staying motivated in our first year of paying off debt.

Every time we would get frustrated by not getting to eat out more, or just not stress about staying on budget we reminded ourselves that this was not forever.

We weren’t going to have to wait four years to go out to eat, we were just waiting till the next month after we paid off our next loan.

Using this method made us able to actually focus on more than just the lofty goal of being debt-free and gave us a little breathing room along the way.

Put your debt-free plan into motion

The last step here is to put your plan into motion! Make the commitment to being debt-free. Write out your plan and your reason why you want to be debt-free.

Post it somewhere you can see every day as a constant reminder of why you are living the frugal life.

Comment below if you have any questions about setting up your journey to being debt-free! I’d be more than happy to help out.

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