Last week, I mentioned 4 reasons why you may not be able to pay off your debt as efficiently as you planned. Being in debt can be frustrating enough, but when you’re not making and progress it can really ruin your mindset. When it comes to paying off debt, mindset and habit are key.
It won’t happen overnight, but it will as you commit to good habits.
That’s why this week, I want to share some healthy financial habits you can adopt in order to make some progress with repaying your debt.
1. Sticking To Your Budget
Creating a budget is one of the best ways to prioritize your spending and determine how much money you have to put toward debt each month.
However, if you don’t stick to the budget you set, you probably won’t make any progress. This is why it’s important to create a realistic budget and make adjustments over time.
Forcing yourself to do something can backfire, so it’s best to be honest about your priorities and what you can afford so it’s easier to live a normal and comfortable life with your budget while still being able to crush your debt.
2. Making Debt Payments First
If you want to get out of debt, you need to put it high on the priority list.
This often means you’ll need to make debt payments first before you take care of other expenses. Don’t wait around and leave the money you designated for debt payments to just sit in your checking account because it could get used for something else instead.
I personally set up automatic payments and try to make minimum or extra debt payments as early in the month of possible so it’s out of sight, out of mind.
3. Avoiding Impulse Purchases
If you want to really crush your debt, you’ll need to keep track of as much of the money you have coming in as possible. Often times, we look back at our finances at the end of the month and realize we spend money but have no idea what we spent it on.
For me, I was ‘missing’ several hundred dollars each month and couldn’t even remember where the money went.
Often times, the culprit is impulse purchases. You may grab some cleaning supplies in Walmart or a random picture frame one day and forget about it completely.
You may buy breakfast on your way to work too many times or order an item from your friend’s direct sales company without a second thought.
These unplanned purchases tend to be made on emotional impulse and they can really hinder your debt repayment.
Try to limit the amount of impulse purchases you make by doing things like leaving your credit cards at home, using the cash envelope system to budget money, or simply avoiding your triggers.
4. Living Below Your Means
Living frugally and spending less than you earn is a great habit to adopt whether you’re in debt or not. It feels great to ‘have enough’ and not be strapped for cash all the time so I like keeping my expenses super low.
Once you get used to it, you’ll realize that your habit can be a lifestyle that can provide you with more freedom.
Cut expenses and downsize if you have to. Become more content with what you have. That way, when you receive extra money like a bonus at work, you can put it toward debt instead of using it to inflate your lifestyle.
5. Holding Yourself Accountable
Be sure to get into the habit of holding yourself accountable as you pay off your debt. If you set certain goals and give yourself a deadline, check back in to assess your progress.
You can also team up with a friend or family member as an accountability partner. My husband and I hold each other accountable for our debt repayment goals since we’re working together for the same result.
When you have someone to answer to regularly (even if it’s yourself), you’ll be more successful with any goal you set especially debt payoff.
6. Focusing on Smart Debt Payoff
While there’s no wrong way to pay off debt per se, there are some ways that are smarter than others. For example, going into the process without a clear strategy isn’t the smartest way to pay off debt.
You should decide what your strategy is and always be on the lookout for ways to make the process run smoother.
For me, I committed to using the avalanche method to pay off debt as opposed to the snowball method or simple having no strategy. With the avalanche method which focuses on paying off the debt with the highest interest rate first, I’m able to save money on interest over time as I pay off my debt.
When I was side hustling, I also got into the habit of making extra debt payments on certain days of the month when the least amount of my payment would go toward interest so more of it would go toward the principal balance.
Get into the habit of using little hacks like these to pay off debt faster and accelerate your progress.
What habits have you adopted in order to pay off your debt?
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