If you have a boat load of debt and not enough money, read on to find out how to start paying off debt with this one simple tip. You can become debt free months or even years faster!
Recently, I overheard a woman discussing making a purchase. “It’s only $50,” she said, “I should just go ahead and buy it.”
I’m not sure what she was buying, but that phrase struck me: “It’s only $50.” I thought to myself, she must not know what saving an extra $50 can do!
When we were in debt, barely making ends meet on a low income, my hubby and I decided to put a little extra ($39 each month) toward our loans.
It seemed like such a small amount would be like trying to give your kids a bath while they’re in the middle of making mud pies. I thought there was no way it would make a significant difference in paying off debt – until we started looking at the numbers.
How to Start Paying Off Debt
That’s when I learned the value of what once seemed like an inconsequential amount and what a big difference it can make to help you pay off debt, even with a low income.
You can change your financial situation drastically by saving just a little extra money each month.
If you put even a few extra dollars per month toward your loans can cut YEARS off the payback period. Yes, paying a little bit extra each month can make a huge difference and help you start paying off debt faster.
So what does saving money, even just a little bit, do to help your bigger financial outlook?
Here’s how it works…
Let’s say you have a car loan: $5,000 at 4% fixed interest. If you make the minimum payment every month, it will take you another 4 years to pay off it off.
If you find a way to save $50 per month to put towards the loan, you can pay it off one year and five months sooner! (You can use a debt calculator to find out the actual debt pay off for your particular situation.)
In addition, you’ll save almost $200 in interest.
Plus, you’ll have freed up an extra $150 (minimum payment plus $50 extra payment) per month to pay off other debt, save for emergencies, or to help you become a stay at home mom.
How to Start Paying Off Debt…Even When You Have No Extra Money
Of course, those extra dollars have to come from somewhere. In my article, 97 Easy Ways to Save Money I shared some ideas that we used to start paying off our debt. In it, I also estimated the savings per month for each of the money saving strategies. They ranged anywhere from $4 per month up to several hundred.
Saving that extra $50 could be as easy as dining out one less meal per month. Or it could be one less trip to the salon.
Even if you’re already living on a bare bones budget like we were, you may be able to find ways to cut your budget for necessities like groceries and utilities (This is the simple system my family used to cut our grocery budget in half.)
You could also use lots of little money saving strategies that add up to $50 per month.
So if you’re like we were and resigned to the fact that you’d still be paying your student loans when your kids were in college, think again.
Try to stop focusing on the total you owe or past decisions you’ve made. Just start somewhere! Even a small additional payment each month can add up fast. After all, it’s only $50.
Are you trying to figure out how to start paying off debt? Have you become debt free already? Share your experience in the comments.
Thankfully, we’re currently debt free. I was blessed to have parents who helped us out as much as possible when we were in school and as a result, my brother, sister, and I don’t have any school loans. Yes, it meant that we missed out on dorm life and commuted from home, which was hard at the time. But, now I’m glad I don’t have loans because it means that I am able to stay home with out daughter, instead of working outside the home.
It’s that “it’s only” that had gotten us into trouble and breaking that habit was sooooo hard! “it’s only” really is a good “excuse to buy what you want right now, instead of disciplining yourself to wait.
This is so true and it is amazing how quickly small amounts add up, especially when interest is involved. We put every extra penny toward paying off my student loans and with our new plan should have them paid off in 5 years! Then I get to finally be a full time artist (and mommy of course)!
We are in the midst of paying down our credit cards, but then student loans will be up next. Thanks for the great tip!
I just tried to check out the free debt calculator you linked to and the link didn’t seem to be working. Do you know if it is no longer in use or if its just a bad link? I definitely want to start being more strategic w/ my debt repayment and I think that could help me out. Thanks.
I’m so sorry about that! I think that calculator isn’t available anymore, but I just updated the link to go to the Dave Ramsey one, and I also added a link where you can download a free spreadsheet too. I hope that helps. Congratulations on working towards paying off your debt!
I just paid off my first old bill on my credit report. I have 3 small ones, one middle and then my college one that starts next year. Congratulations on the beginning of your process.
The calculators are so much fun to play with as they show how quickly those extra payments add up to pay the loans off faster. Any time I am tempted to spend money, I just think about the calculators and the numbers I have run. That usually stops me in my tracks. Often, debt seems insurmountable so we don’t even begin to try. It is amazing how quickly the little payments amount to big savings. Thanks for the encouragement, Shannon!
We are doing a no spend September to help us jump start our savings. It isn’t easy but we are doing it. Now just to figure out how to cut our grocery bill down a little bit.
Start growing your own food. Even if you don’t have any land you may have a balcony or porch you can put containers with lettuce, tomatoes, herbs, garlic, chard, beans.
These are great tips and resources for anyone working to pay of debt. We are debt free now and we work hard to keep it that way so that I can continue to stay at home. We have a budget and stick to it pretty well.
This is a humbling post that I really do enjoy. A little bit adds up. Thanks for the tip! I’m going to start putting a little bit more aside each month.
Yea! I’m so happy this helped inspire you, Lucinda. :)
Thanks so much Shannon for posting this! Such a good reminder that those little amounts add up so quickly. We are paying off our last loan and have a little under $21k to go (silly student loans!). We found out that we could have this paid off sometime in March of next year. Then we found out we were expecting #5 and are due in mid-March. So for now, we are on hold for paying extra on our debt but we are socking away everything we can in savings so hopefully when we get home, we will become debt-free. :)
I had some college loans when I was in school. Seemed like it would take forever to pay off. One day when I was at the bank bemoaning how it was never going to end, one of the bank tellers leaned over and told me to put $25-50 extra per month on the principle–paid it down in no time flat. Have applied that rule to other longer term debt. Always grateful to her for giving me a reasonable tip that I could actually handle.
That is fantastic Lizette! Thank you for sharing! I’m so happy this tip worked for you as well as it did for me.
Wow! Such great advice! Glad to know that this worked for you too.
I downloaded this spreadsheet and I have to say it is one of the most helpful things I have ever found on the internet. I saw this one pinterest. Thank you.
Great post Shannon! It always seems like the smaller dollar amounts don’t matter in the grand scheme of things but they do. This is a good reminder that every single dollar counts!
I’m adding $25 extra to a foolish car title loan I had taken out 1.5 years ago. I hope to add more to this payment as things get better for me. Also I deposit $10 each month in a savings account, where I had no savings at all. I hope to increase my savings as well.
I have been doing this with my mortgage at any opportunity I have gotten. (Once per year to increase payments for that year) I’m now 6 years into a 30 year mortgage and my home will be paid off in 11.33 years. That means almost 13 years sooner than I should be done. By August 2018, I’ll be adding again to bring it to about 10.5 years. All on my one income. Small amounts add up!!!
That’s amazing and so encouraging! Thanks for sharing your debt payoff story with us.