37 Tips To Become Debt Free (That Actually Work!)
Most people take on debt without any real plan on how or when they can repay it.
Maybe you get a car loan, pay the minimum, and before paying it off, upgrade to a new car with more borrowed money.
Or maybe you want a new phone or can’t say no to a fun holiday and you put it on your credit card.
Having this debt hanging over you can be very stressful and really limit what you can do with your money. It also limits your choices and your freedom.
I recommend staying out of debt where possible, especially when it comes to credit cards! Why? Credit cards have the highest interest rates compared to all other debts!
I worked in the debt department of a bank for a number of years and it really opened my eyes to the problems with taking on too much debt!
I want to point out here that there is a lot of shame and judgment surrounding debt and I’m not here to do either. Judgement gets us nowhere! You are taking active steps to improve your situation and that’s something to be proud of.
The only debt I can get behind is for a house because it’s an asset and will most likely appreciate in value. If you’re getting a mortgage, make sure you can afford it and try to pay it off as quickly as possible.
This article outlines some of the top tips and tricks that I have used to become a debt-free homeowner!
37 Tips To Become Debt Free:
1. Figure Out Your Total Income
2. Make Note Of Your Expenses
3. Evaluate Your Debts
4. Write Down Your Financial Goals
5. Track Your Spending
6. Make A Budget
7. Reduce Credit Card Debt With The 0% Balance Transfer Method
8. Refinance Or Offset Your Mortgage To Save Money
9. Evaluate And Update Your Budget
10. Save Up A Starter Emergency Fund
11. Pay Off Your Smallest Debt First
12. Pay More Than The Minimum
13. Use Any Extra Money To Pay Off Debt
14. Negotiate Lower Interest Rates
15. Consider Consolidating Debts Into One Loan
16. Increase Your Income
17. Reevaluate Your Expenses
18. Sell Unused Items
19. Set Up Automatic Payments
20. Avoid Credit Cards – Use Cash Or Debit
21. Make Your Own Coffee
22. Limit Dining Out
23. Consider Downsizing Your House
24. Start A Side Hustle
25. Shop Around For Cheaper Utility Providers
26. Try ‘No-Spend’ Days Or Weeks
27. Take Up Free Hobbies
28. Cut Out Expensive Habits
29. Cut Transportation Costs
30. Implement The 48 Hour Rule For Purchases
31. Switch From Monthly To Bi-Weekly Payments
32. Pay All Your Bills On Time
33. Don’t Take On More Debt
34. Use The Debt Snowball Method
35. Set Debt Repayment Milestones
36. Reward Yourself For Hitting Targets
37. Enjoy Life With Control Over Your Finances
Affiliate Link Disclosure
Some of the links on here are affiliate links and I may earn if you click on them, AT NO EXTRA cost to you. Hope you find the information here useful! Thanks.
Related Posts on Tips To Become Debt Free
- How To Reduce Credit Card Debt: 5 Effective Methods
- How To Save Money On Your Mortgage: 7 Simple Tips
- 21 Best Frugal Living Tips To Retire Early!
- 25 Smart Ways To Save Money On A Small Salary
Tips To Become Debt Free
1. Figure Out Your Total Income
The first step to becoming debt-free is assessing your current financial situation. You need to figure out your total income in order to make a plan for your money.
Whether you are single or in a couple, you need to calculate the total household income from your job, any side hustles, or other income streams.
Ok done that? Let’s move on to the next step.
2. Make Note Of Your Expenses
Once you know your total income, you should make note of all your expenses.
Start with your biggest expenses, your rent or mortgage, car loan, bills, groceries, and so on. Then make sure to include any other expenses, no matter how small.
3. Evaluate Your Debts
It’s important to evaluate your debts in order to make sure you’re paying them off in time and optimizing your debt repayments to become debt-free quickly.
Make note of all your debts; which ones are the smallest or largest and also which ones have the highest interest rates.
4. Write Down Your Financial Goals
Once you’ve written down your total income, all your expenses and all your debts it’s time to make a plan.
While the ultimate goal is to become debt-free, make sure to set short-term goals such as saving a certain amount each month or building up your starter emergency fund.
These short-term goals will help to keep you motivated.
If you have a clear financial goal it will be easier to stick to your financial plan.
5. Track Your Spending
To create an accurate budget that you will be able to stick to, you should track all your spending for a month or so.
This will give you a clear picture of where your money is going and, possibly, show where you’re currently wasting money!
I personally use Revolut to track my spending. It has a built-in budget tracker, where you can see how much you’ve spent in different categories and how much you have left in your budget each month.
I also use an Excel spreadsheet to track my big expenses and progress toward my financial goals!
There are lots of Excel budgeting templates available on the Microsoft website. You can choose the one that suits you best!
If you would prefer a budget tracker app there are some great ones such as Plum and The Every Dollar app.
Photo Credit: @s.h.e.budgets
6. Tips To Become Debt Free – Make A Budget
This is the most important step in any financial plan because if you make an unrealistic or inaccurate budget it will be very difficult to reach your financial goals.
In your budget it’s a good idea to start with the essentials, accommodation, food, and transport, then make sure your debt repayments are accounted for, then your discretionary spending or savings can be allocated.
You can check out this Dave Ramsey Budget Percentages article to help make your budget!
7. Reduce Credit Card Debt With The 0% Balance Transfer Method
Once you’ve made a budget, you can speed up your financial goals by reducing your expenses.
A great way to reduce credit card debt is by switching from your high-interest credit card to a 0% Balance Transfer Card!
It’s an introductory offer that credit card providers use to entice new customers to switch and it can save you a lot of money!
Check out this article if you want more tips to reduce credit card debt!
8. Refinance Or Offset Your Mortgage To Save Money
Another great way to reduce debt is by saving money on your mortgage!
You could switch to an offset mortgage, which allows you to link your savings to offset your mortgage, ultimately saving you a lot on interest!
You could also refinance your mortgage to a lower interest rate or a shorter term, both of these options could save you a lot of money!
Check out this article for more tips for saving money on your mortgage!
9. Evaluate And Update Your Budget
When you start using your budget and sticking to the plan you might notice you’ve allocated too much or not enough money to certain categories.
If that is the case, you can update your budget to match and hopefully that will mean you can allocate more towards tackling debt!
Photo Credit: @asunnysideuplife
10. Save Up A Starter Emergency Fund
An emergency fund is a crucial part of any financial plan because without it the whole plan can fail.
Dave Ramsey recommends a starter emergency fund of $1,000, then paying off all debt (except the house), and then saving a fully funded emergency fund of about 3-6 months’ expenses.
An emergency fund acts as a buffer to your financial plan when unexpected costs such as home or car repairs come up!
Photo Credit: @albertapp
11. Pay Off Your Smallest Debt First
Paying off all your debts from smallest to largest is known as the Debt Snowball Method.
With the Debt Snowball Method, you pay the minimum on all your debts, then pay extra on the smallest one to clear it faster.
Once the smallest one is cleared, you focus your extra money on the next smallest and so on until you’re debt-free!
12. Pay More Than The Minimum
An easy way to get out of debt quicker is by paying more than the minimum.
However, it’s important to make sure your budget covers all your expenses and upcoming costs before you allocate extra to your debt repayments.
13. Use Any Extra Money To Pay Off Debt
It’s important to stick to the plan even if you get a bonus from work or some other unexpected money.
If you allocate that money towards paying off debt rather than buying things you don’t need, you will become debt-free so much quicker!
14. Tips To Become Debt Free – Negotiate Lower Interest Rates
Similar to refinancing your mortgage, you might be able to negotiate lower interest rates on your other loans too!
This could save you a lot of money!
15. Consider Consolidating Debts Into One Loan
If you have multiple loans, you could consider consolidating all of them into one loan.
You can do this by taking out one personal loan to pay off all your other debts. Or you could roll all your debts into your mortgage.
This could result in lower interest rates and simply make it easier to track your debt repayments!
There is some great information about consolidating debts on the Competition and Consumer Protection website!
16. Increase Your Income
If you want to speed up becoming debt free you could try to increase your income.
You can achieve this through getting a promotion at work or else starting a side hustle.
Even an extra $100 per month from a side hustle or salary increase could make a huge difference in getting out of debt quicker!
Here are some online side hustles you could do in your spare time!
Photo Credit: @thefairyjobmother
17. Reevaluate Your Expenses
This is when you check if some of your expenses are really necessary.
For example, that streaming service that charges you $15 a month is not a necessity, and you might not even use it that much! CANCEL IT!!
There could even be subscriptions you’ve forgotten about that are taking money from you every month!
Some examples of unnecessary expenses are:
- Streaming subscriptions (e.g Netflix, Amazon Prime, etc.)
- Coffeeshop coffee (make your own!)
- Buying lunch every day (also make your own!)
- Buying new clothes
- Going out for drinks
- Memberships that you don’t use
These are just examples, and you don’t have to be miserable to save money.
You can still buy that Starbucks coffee as a treat, occasionally go out for drinks, and buy new clothes when it fits within your financial goals!
Your financial plan has to be sustainable, so enjoy yourself, but keep your financial goals in mind.
Photo Credit: @annette.plog
18. Sell Unused Items
Most of us have wardrobes full of clothes we don’t wear or closets full of things we dont use yet we still keep them in the house!
A great way to tidy your house and make some extra cash is by selling unused items.
You could have a garage sale or simply sell them online using FB Marketplace or Carousell.
19. Set Up Automatic Payments
Setting up automatic payments will ensure that your money goes to the right place without you having to think about it!
This can be applied to bills, debt repayments, savings, and even for allocating your spending money.
If you set this up properly you will be debt free before you know it!
20. Avoid Credit Cards – Use Cash Or Debit
Credit cards can be incredibly useful but they can also cause a lot of problems.
I prefer to use cash or debit because it restricts my spending to the amount I set for myself. Credit cards can make it tempting to buy things you can’t afford.
Photo Credit: @lom.8009
21. Make Your Own Coffee
Coffee is one of the things that people spend a huge amount of money on without even realizing the extent of it!
If you bought a $3 coffee every day that’s almost $100 per month on coffee! If you make it yourself, it could be closer to $0.03 per cup!
22. Tips To Become Debt Free – Limit Dining Out
While dining out can be very enjoyable and a great way to socialize with friends, you should limit it to fit within your budget.
If you can achieve your financial goals while also giving yourself enough discretionary spending money, the plan will be much more sustainable.
If you currently dine out a lot and want to save some money, I would recommend limiting it to once per week. (just make sure the cost of dining out fits within your discretionary spending budget!)
That way you can still go out and socialise while achieving your financial goals.
23. Consider Downsizing Your House
If you have a house that’s bigger than you need, you could become debt-free a lot quicker if you downsize your house.
You might even be left with some extra money after downsizing and paying off your debt!
Photo Credit: @smartwomensociety
24. Start A Side Hustle
Starting a side hustle is a great way to earn some extra money and this could be used to speed up your debt repayments!
Some great side hustles that you can do remotely include freelance writing, teaching English online, or selling digital products!
25. Shop Around For Cheaper Utility Providers
You can contact different utility providers to find a better price. Usually, utility providers offer incentives for people to switch.
You could save a lot of money by switching!
Photo Credit: @budgetgoalz
26. Try ‘No-Spend’ Days Or Weeks
This is a great trick that I’ve used to save money in the past.
No-Spend days are when you continue to pay for necessities but you don’t spend any extra money on things like eating out, shopping, etc.
Photo Credit: @budgetingforbeginners
27. Tips To Become Debt Free – Take Up Free Hobbies
My favorite free hobby is hiking, you will most likely already own a pair of old shoes and a rain jacket so you don’t even need to buy equipment.
I also love to cycle, once you have a bike and helmet, it’s a completely free hobby!
Pairing free hobbies with ‘No-Spend’ days is a great way to have fun while also saving money!
Photo Credit: @andreacostantini
28. Cut Out Expensive Habits
Drinking alcohol and smoking cigarettes affect financial plans more than you would think!
If you could cut them out or even restrict them you would save so much more money and get out of debt quicker.
29. Cut Transportation Costs
The way you cut transportation costs will vary depending on your circumstances and where you live.
Walking or cycling is a great way to reduce transportation costs, and it’s healthy too!
Also, you might be able to get yearly public transport tickets rather than single-use tickets which makes the cost much lower over the year.
30. Implement The 48 Hour Rule For Purchases
I use this rule when I’m tempted to do some online shopping.
If you want to buy something, wait 48 hours, then if you still want to buy it, you can.
Usually, 48 hours later I’m not that interested and I save some money! Try it!
31. Switch From Monthly To Bi-Weekly Payments
This is a great way to speed up your debt repayments. Instead of making monthly payments, you can switch to paying every two weeks.
This will result in making 13 payments in the year rather than 12!
32. Pay All Your Bills On Time
In order to become debt-free quickly, you need to keep on top of your bills.
If you pay bills late this can sometimes incur an extra charge. Avoid these additional fees by setting up standing orders or reminders to pay on time!
33. Tips To Become Debt Free – Don’t Take On More Debt
If you want to become debt-free, don’t take on more debt!
If you have an effective money management plan in place, you won’t need to take on more debt!
Photo Credit: @thepennyhoarder
34. Use The Debt Snowball Method
This is my favorite debt repayment method as it sets clear targets and short-term goals!
With the debt snowball method you pay the minimum on all your debts, then pay any additional money you can towards the smallest debt.
Once that is paid off you focus your efforts on the next smallest and so on until you’re debt-free!
35. Set Debt Repayment Milestones
It’s important to set short-term goals and milestones to keep motivated.
You can set milestones such as paying off a certain amount or hitting certain timelines to keep up the momentum!
Photo Credit: @ladiesfinanceclub
36. Reward Yourself For Hitting Targets
When you hit your debt repayment targets be sure to acknowledge it and reward your efforts!
This will make the process much more enjoyable and easy to stick to!
37. Enjoy Life With Control Over Your Finances
Once you’ve set up your finances to hit your targets and have gotten used to managing your money effectively, money will no longer be a source of immense stress.
If you can cover all expenses and debt repayment targets, you can use your discretionary money guilt-free and enjoy the rewards of your efforts!
FAQs On 37 Tips To Become Debt Free:
How To Become Debt Free Quickly?
If you’re wondering how to become debt free quickly you should always pay at least the minimum required payments on your credit cards and loans. Then you can allocate extra money to pay off your debts, from smallest to largest. You can also consolidate debts or negotiate lower interest rates to become debt free quickly.
What’s The Smartest Way To Get Out Of Debt?
If you want to know the smartest way to get out of debt, there are two main ways. You can pay off your most expensive loan first, from the highest interest rates to the lowest. The other way is to pay off your smallest loan first and work up to the largest one.
What Is The 50 30 20 Rule?
The 50 30 20 Rule involves splitting your after-tax income into three categories of spending: 50% goes to needs, 30% goes to wants, and 20% goes to savings. This method is great for reaching your financial goals as it can be applied to any income level!
Why Is It A Good Idea Never To Go In Debt?
The reason it is a good idea never to go into debt is because carrying debt without a good plan to pay it off can lead to an unsustainable lifestyle. Many people use debt to pay for college, a car, or house, but if you borrow too much it can be a huge financial burden.
Getting out of debt is one of the best ways to take control of your financial life.
Once you’ve become debt-free, you can put your money to work. You can make investments that earn interest or pay dividends. You could even invest in courses to progress in your career so you can earn more.
When you take control of your financial life you can use the extra resources to improve your life and the lives of the people you care about.
If you want to know some great ways to earn extra money or how to use your money in better ways then check out these articles!
Related Postson Tips To Become Debt Free
