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How To PAY OFF DEBT FAST With Low Income! (essential habits)
Today I am going to speak to you from a slightly different perspective, which is to focus on seven essential habits you need for how to pay off debt fast.
This is especially important if you are someone who is on a low income, although these ideas apply to all income levels.
Paying off debt doesn't just feel good, it's amazing for increasing your net worth, as well as reducing your ongoing monthly expenses.
In fact, I was chatting with a friend of mine recently and she was really surprised to learn that our family monthly expenses were as low as they currently are.
Of course, it is easier when you don't have any mortgage debt or personal debts such as credit cards, or other types of loans.
If you don't have those bits of debt in your life, what you find is that life is simpler.
Your monthly expenses are a lot lower, which means that you're more likely to achieve financial independence a lot quicker (if it's a goal you desire).
Our debt freedom was not handed to us as a gift though.
It required a deliberate freedom plan tied to a necessary change in money habits over time.
Let's dive in and explore these various habits that have helped us work towards paying off debt a lot faster and achieving financial independence a lot quicker.
We've have spoken to you many times about how we paid off our mortgage in seven years as well as numerous resources around becoming debt free.
Table of Contents
HOW TO PAY OFF DEBT FAST (EVEN ON A LOW INCOME)
Let's dive in now and look at these seven habits, which have helped us pay off debt a lot faster.
1. Making Debt Visual
I love this, as someone who is highly visual in my outlook on life.
This was a big help when we started seriously exploring how to pay off debt fast.
Our key focus was on working towards paying off our mortgage early.
One of the key things that really motivated me was to convert the amount that we owed into easily understandable and visual metrics.
I would calculate numbers such as:
- how many more years and months we have left in order for us to become debt-free?
- What percentage of our debt payments was capital vs interest?
- In what month and year do we expected to become debt free exactly?
I even wrote down ideas of how we'd celebrate if we became completely debt free!
This made this journey all very exciting and purposeful! 😊
And each month it felt like we were having a countdown. And with that countdown, we knew we had a very specific freedom date.
This kept becoming debt free at the forefront of our focus each month.
Other things we did included asking ourselves, what percentage of this asset do we currently own?
In our case, it was our home, what percentage of this house do we own at this stage of our journey towards debt freedom?
For you, it might be that you are trying to pay off a car.
The question might be what percentage of that car do you currently own so far?
Your goal would be to ultimately own that asset outright.
Action point – Today, for motivation, think about what various metrics you could have in your life in order to keep your debt highly visual.
2. Communication Effectively
Lack of communication is a major issue among couples who are exploring how to pay off debt fast.
The simple act of your partner spending money on a credit card without your knowledge, could have two major impacts.
It could either set you back against your debt free goal, and/or it could make you start to question some of the trust between you and your partner.
Communication is so so important.
It's critical in order for you and your partner to be on the same page in order to work towards achieving your debt freedom goals.
In our household, we communicate about money all the time.
Practically, we talk about what we expect to be spending for the week ahead.
Every single month, Mary and I have a Money Day, which is the first day of each month.
We sit down and look at how life had happened from a money perspective, over the last 30 days.
Consider bringing those sort of ideas into your own life as well.
Generally speaking, how do you make sure that you're communicating effectively?
Such that you are on the same page, with not just your partner, but also with other people (e.g. creditors) outside of your household.
e.g. communicate with the people who you owe money to if there's going to be a delay towards you paying off a certain amount each month.
This ensures that debt is not working even more against you than it might ordinarily be doing at the moment.
Action point – Today, for full transparency, discuss your true debt situation with your partner. Make the topic of how to pay off debt fast a top priority (if not already).
Make a list of any creditors that you know you should give a phone call.
3. Keeping Up With Detail
A good test of your of money management is your ability to recall your key numbers.
- Do you know how much you owe at the moment on your mortgage?
- How much do you owe across all your credit cards?
- What rates are you paying on your various bits of debt?
Your ability to recall this information gets you a lot closer to those numbers intimately, however weird that sounds.
It just helps you really stay on top of things and to connect the dots.
You might make some money over here, then recall that actually, you are paying 35% interest on this particular debt over there.
So your priority should be to use liquid cash you have made to offset the expensive debt.
If you do not know your key numbers, you would not be able to make effective decisions, such as focusing on the debt that's most damaging to your finances.
Action points to take after reading this post, sit down and ask yourself:
- What are my key numbers financially?
- How much am I earning?
- What type of debts do I have?
- Who am I owing various monies to?
- What is it costing me to have that debt in my life?
Answer all these questions a simple sheet of A4 paper.
It will help you have something you can look at next month when you have your own Money Day.
You can review your finances to see how you have progressed from one month on to another.
Did I mention – diarise your own Money Day? 😉
4. Budget Consistently
A lot of people when they think about budgeting, think of it from the perspective of just allocating existing income to expenses.
In addition to this, I like to think of budgeting around an income plan i.e. factoring in how much additional income we expect to generate each month.
Be consistent with making time for budgeting income and not just thinking of the expenses.
By doing that, you are more likely to take the necessary steps towards having more than one stream of income.
Making alternative sources of income will help you to accelerate your goals towards debt freedom.
So make the most of your time. Diarise it, take this seriously.
You have to see the budgeting aspect as a key part of your debt freedom.
Give it the respect that's necessary for it to act as an effective tool in helping you achieve your goals.
Action Point – If you're interested in a really simple but effective budgeting tool, feel free to check out our Budget For Life
It's what we use every single month in our own family to stay budgeting consistently.
5. Remembering Why This Matters
I know for certain that a big part of our journey towards debt freedom was remembering what mattered the most.
By this I mean, why on earth are we pursuing debt freedom?
I know a big part of my motivation was remembering my parents going on their journey towards becoming debt free.
Seeing them struggle in various ways to get rid of debt and eventually break free from it.
For me, I wanted to rewrite that picture. I wanted to tell a different story for my family.
So Mary, and I, always focused on what was most important to us.
One of the big things we had in mind was the possibility of taking a sabbatical or maybe 1, 2 or 3 months off at some stage in our lives.
It's funny looking back at some of our diary entries three years ago, we were wishing that one day we would be able to do this.
That we'd get to this point of debt freedom.
And it was a big motivation.
Now we're debt free!
We went out for a walk recently, and Mary and I were speaking about this idea of actually taking this sabbatical, at some point this year.
After that walk, we made this video to share how becoming 100% debt free and mortgage free has completely changed our lives.
Once you get past becoming debt free, you start to focus on planning your debt free adventures!
The really exciting things that you had in mind for what you'd do with your life when you eventually became debt free.
Action Point – Here's what I challenge you to do today, write a Debt Free Statement.
I want you to write this down if you can.
Today if you've got a diary or journal, whatever it is, I want you to really just write this statement:
I want to become debt free by…………………………… (insert date), so that I can …………………………… (insert your why)
Write down the date from you will be debt-free and put the reason why.
For example, I want to become debt-free by the 31st of December 2020 so that I can begin building an investing portfolio.
For us it was to pay off our mortgage in order for us to take a sabbatical, become financially free and have the option to pursue our passions.
These debt-free statements are good for your motivation.
They're good for you to look back on as what you had been dreaming about.
i.e. what you have been telling yourself, is your core motivation for wanting to be debt-free.
So go ahead, try to write out your debt-free statement.
In fact, I'd love it if you could share your debt-free statement below in the comments if you are open to it.
I'll be more than happy to jump in comments and have a look at what you are looking forward to as your motivation for becoming debt-free.
As Mary and I are planning this sabbatical in our lives, we'd love to hear from you guys, have you ever done a mini-sabbatical?
For a month to three months? I'd love to hear from you. Also, what did you get up to during your sabbatical?
And what suggestions or ideas you might you have for us to do or where to go on our sabbatical.
Look forward to reading your comments.
6. Not Stressing
This might sound really, really obvious. But it's actually quite hard to make this into a habit.
For a lot of people in debt, it essentially binds them from partaking in a lot of opportunities.
People focus a lot more on their past mistakes and they are very doom and gloom, about that.
And that can have a huge impact on many people's mental health.
In fact, lots of research has shown that as much as one in four people suffer from a mental health-related issue tied to worries around debt.
So my recommendation here is to try to really think about debt from a place of improvement.
Think about it from a positive perspective. You know that you are taking the leaps forward towards trying to improve your life.
And that's what this debt free journey is really about.
This is a mindset shift from the typical position where most people kind of dwell on the fact that they haven't really done well in life.
They have made really awful mistakes that have been led by bad behaviours, which has meant that they've remained in debt constantly.
Action point – A good way of developing this kind of improvement mindset is to start to talk about the debt.
I find it's helpful to have a conversation with other people who you trust…
…or even other people who may be in the same position but who have taken certain steps forward in paying off their debt.
These people may be able to offer some thoughts around how they dealt with it.
In addition, they can share how they changed their thought process to think about debt from a place of improvement, rather than from a place of constant worry.
7. Decluttering Your Home
This is a bit of a wild card and it's the habit of decluttering your home.
You might be thinking, what on earth is that got to do with how to pay off debt fast?
Well, for one decluttering your home not only frees up items from your home, which you can then sell to raise some money to pay down debt.
It actually helps you to declutter your mind.
Nothing beats experiencing peace in your home, such that you are able to think about debt from a different place, as I mentioned, a place of improvement.
Whilst focusing a lot of your efforts in other areas, such as exploring side hustles that might be able to help you accelerate that journey towards debt freedom.
I have written a blog post called How to Declutter Your Mind For Peace and Progress In 7 Steps.
Action Point – Read the above post for really interesting ideas for how you can really prioritise decluttering.
i.e. not just your physical environment, but actually decluttering your mind in order for you to seek and make progress in your life.
I'd love to know from you in the comments.
What To Read Next>>
- How To Stop Living Paycheck to Paycheck (8 practical ways)
- FREE Mortgage Overpayment Calculator (download)
- Reader Case Study – Pay Off Debts Fast or Invest?
What To Watch Next>>
We made a video on this very topic of how to pay off debt fast. Watch it here:
What habits have you introduced into your life in order to help you pay off your debts a lot faster?
Share life hacks, real-life experiences, and the various things you have done to move forward.
Do please share this post if you found it useful, and remember, in all things be thankful and Seek Joy.