When you first get started with paying off debt, you likely have a mix of excitement and fear. Excitement because you are starting this new process to get your finances together and stop wasting your money on interest. And fear because you have no idea how to get started.
In order to aggressively pay off your credit card debt, you have to apply these fundamental rules to your finances:
- Build a budget (and stick to it!) to ensure you have complete control over your finances
- Reduce your spending in multiple budget categories to increase the amount applied toward debt
- When at all possible, bring in other sources of income
The most important step here is building a budget (#1), which allows you to allocate more toward your debt (#2). See if you are able to drastically reduce or even remove some budget categories, like restaurants or entertainment for a short period. That money can then be poured into your principal payoff.
Then, find avenues of income to increase that monthly payment (#3). This can be through selling things around the house or even grocery delivery on the weekends.
Once you start applying these fundamentals, you will start to gain more confidence in controlling your money.
Table of Contents
How do I pay off a large amount of credit card debt?
There are so many avenues you can take to pay off your credit card debt. You’ve likely heard of the most common suggestions: using balance transfers and/or consolidating your debt. But in many cases, these simply address the symptom, not the cause of the issue.
Building and sticking to a budget is the best way to pay off a large amount of credit card debt. While it sounds simple, it is a crucial first step in paying off a substantial amount of debt. This is because, without a budget, your money simply is not working efficiently.
It is easy to overspend in multiple categories (like food and entertainment) and leave little to pay off debt. By building and using a budget, you have complete control over how much money is allocated where, and this includes how much is allocated to paying off your credit card debt.
Using a budget, especially when you’re not used to it, can feel like an overwhelming step in an already overwhelming process like paying off your credit card debt.
Just know you’re not alone! That is a really common feeling to feel when you’re getting started.
So how do you build a budget and tailor it to paying off a large amount of credit card debt?
You begin building your budget with a tool that you will come back to time and again. This could be a budget binder, a spreadsheet, or a budgeting app. Here is a great list of budgeting apps to take a look at, or a comprehensive list of budget binders if you want a dedicated, physical binder to handle your finances.
Once you build your budget, the best way to pay off a large amount of debt is to reduce your spending in as many budget categories as possible so you can allocate the largest amount of your income to paying off your debt.
Areas of your budget where you can reduce your spending:
- Restaurants and take-out food
- Entertainment (movies, concerts, going out to bars)
- Monthly subscription services
- Cable
- Coffee shops
- New clothing (unless absolutely necessary for your job)
- Reduce electricity use
- Reduce water usage
- Gym memberships and exercise classes (check YouTube for free classes)
Related reading:
How can I pay off $10,000 in credit card debt a year?
Paying off $10,000 of credit card debt in a year sounds challenging, but below we look at what that means in terms of how much your monthly payment should be in order to pay off that debt.
You will need to make monthly payments of $907 to pay off $10,000 of credit card debt in a year. This number is based on the average interest rate of approximately 16%.
Here are other monthly payoff amounts, based on different interest rates:
| Interest rate | Monthly payment | Amount of interest paid (total) |
| 12% | $888.49 | $661.85 |
| 16% | $907.31 | $887.70 |
| 18% | $916.80 | $1,001.60 |
| 23% | $940.76 | $1,289.16 |
| 26% | $955.30 | $1,463.62 |
Depending on the interest rate on your credit card, your monthly payments could vary by about $100 per month.
If we use the average monthly net salary in the United States of about $2,730, then you will have to apply about 33-35% of your monthly income to debt in order to pay off $10,000 of credit card debt in a year.
This is doable!
As long as you cover your necessities first and cut your expenses on anything that’s not essential, you should be able to apply that percentage to your debt payoff.
Again, the highest chances for success in this is to HAVE A BUDGET!
What are 3 ways to pay off credit card debt fast?
When you’ve made up your mind to pay off credit card debt, you want to get through it as quickly as possible. With a large amount of debt hanging over you, it’s hard to know where to start. How do you make a plan to not only get out of debt, but get out of debt quickly?
The 3 ways to pay off credit card debt fast are:
- Using the debt snowball or debt avalanche debt payoff methods
- Use your monthly budget to cut expenses and apply more toward debt
- Find ways to bring in extra income, like selling unused items around the house
1. Using the debt snowball or debt avalanche debt payoff methods
Chances are, you’ve heard of the debt snowball and/or debt avalanche methods for paying off your debt.
If you haven’t heard about them, here’s what they are in a nutshell:
- the debt snowball method lines all of your debts up, the smallest principal balance to the largest principal balance, and you make minimum payments on everything but the smallest debt. Every penny you have extra is applied toward the principal of that smallest debt.
- the debt avalanche method lines all of your debts up, from the smallest interest rate to the largest interest rate, and you make minimum payments on everything but the largest interest rate. Every penny you have extra is applied toward the principal on the largest interest rate debt.
These two debt payoff methods pack a lot of punch in them. But not in the way you would think.
These methods work so well because they create a structured plan for how to pay off your debt.
Dave Ramsey, the person who made the debt snowball method popular, literally tells his listeners that the debt snowball method is designed to give you little wins along the journey of paying off your debt.
And, while the debt avalanche method may save you money in interest, it’s truly not enough to make a difference if you’re paying off your debts in an expedited fashion.
Paying off your debt with the debt snowball or debt avalanche method gives you the roadmap you need to pay off your debt efficiently and gives you confidence in your debt payoff journey.
Related reading:
2. Use your monthly budget to cut expenses and apply more toward debt
Budgeting gives such a HUGE surge of power to you! From the outside, it may seem limiting. But a budget puts you in the driver’s seat of where your money goes.
With you in the driver’s seat, you are the one allocating money to each budgeting category.
This includes allocating money to both necessary and more importantly, unnecessary budget line items.
When you’re paying off debt, it’s important to adopt an “all-or-nothing” mentality. You’re either all in or you’re not in it at all.
You can’t choose to pay an extra $100 to debt this paycheck by taking away restaurants and then, on a whim, go out to grab a cheeseburger. You have to go all-in and stay all in.
Once you’ve decided to go all-in, it’s time to finesse your budget to reflect your all-in mentality.
Cut out any extras that are not absolutely necessary. If you’re looking for ways to cut your budget down and pour money toward your debt, check out this post on areas you can cut.
And if you’re worried that cutting down your budget will be extremely limiting, check out this post on cutting down but still living well.
3. Find ways to bring in extra income, like selling unused items around the house
Bringing in extra income doesn’t always mean having multiple jobs (although it could if you’re able to!).
You could simply look around your house to find unused items to sell.
For example, if you have a lot of unused clothes in your closet, there are several different platforms out there to sell what you don’t use anymore! Here’s a comprehensive post on different platforms you could use to sell your clothes.
Or, if you’d rather try different methods online, here’s a great post about making instant money online.
If you’re able to get an extra job, here are a few ideas for a side hustle:
- Grocery delivery – Instacart and Shipt are two big companies
- Pet sitting/walking – Rover is great for this
- Drive people around – Uber and Lyft are big names
- Sell photography
- Freelance work
Related reading:
- 9 Best Cash-Back Apps, Coupon Apps, and Extensions
- No Spend Challenge: How to Successfully Save the Most Money
Should I aggressively pay off debt or save?
Paying off debt or saving your money can be a hard choice, especially since emotions play such a huge part in the decision. But the numbers for each argument don’t lie, and there’s one very obvious winner here.
Aggressively paying off your debt yields a substantially larger return than placing your money into a savings account.
On average, the dividend rate for a savings account is about 0.17% APY. If you are able to save up $10,000 in one year, that would only equate to $17 in a dividend payout.
On the other end, holding a balance of $10,000 on a credit card with an interest rate of 16% (national average) will have you paying $887.70 toward interest alone.
That’s not to say that you shouldn’t have something in your savings.
You absolutely should!
Otherwise, if an emergency popped up, you’d be forced to find the money to cash flow that emergency or, even worse, have to rack up more debt on your credit card.
When we were aggressively paying off our debt, we decided to follow Dave Ramsey’s recommendation of stashing away $1,000 for an emergency. That money was NOT for anything other than a true emergency, and it gave us the peace of mind we needed to throw everything we had at our debt.
While it definitely feels more secure and overall better to have money stashed in your savings, it makes more financial sense for you to pay off your debt than to save up that same amount of money.
How can I pay off debt fast and not go crazy?
I completely understand why you think it’s easy to go crazy while paying off debt. Not only are you cutting back your spending significantly and changing your lifestyle in a sense, but you’re also going through the grind of paying down debt for months at a time.
To keep your sanity while paying off debt, simply keep your “why” in mind. Your “why” can be the retirement you’re dreaming of, it could be a stellar vacation you can cash flow, or it could be a big purchase you’ve wanted to make but were too strapped to do it.
Keeping that “why” in mind is crucial to getting through the monotonous task of paying off debt. You could have a picture of your “why” hanging up on the fridge so you always see it or even make your plans to complete your “why” (like looking up flight and hotel prices). Whatever you do to keep your “why” on the forefront, make sure it’s something that keeps your inspiration steady on paying off debt.
When we were paying off our large sum of debt, we cut everything. And I mean everything.
Our entertainment fund went down to ZERO each month. We didn’t go out to eat, but instead cooked everything at home. No coffee shops; just brewed our own coffee.
There were times when it all felt like too much.
The thing that kept us going was seeing how fast we could get our debt numbers down. Our “why” was so we didn’t owe anything to lenders anymore. That we could erase the debt section of our monthly budget.
We also found ways to have fun without having to pay any money. I put them all into a list for you, in case you need ideas to boost your entertainment without having to feed it money!
Here are a few ideas for free entertainment:
- Geocaching
- Swap items with friends (board games, decor, books)
- Visit a grand opening (they sometimes offer free food/drinks for stopping in!)
- Start a new workout regime
- Learn a new language (Duolingo offers free classes)
Related reading:
