How To Pay Off Debt And Build A Better Future

How to pay off debts is a lesson that many Americans need to learn. The interest alone is absolutely crushing a large part of the population.

In my previous article, I wrote that the typical American pays $279,002 in interest payments over the course of their life. At an annual income of $50k and accounting for the fact that you need to earn more to pay income taxes, it will costs you seven years of your life. Money is just the time it took you to gather it, after all.

I don’t want to spend seven years of my life in servitude to the banks. I don’t think you do either. So let’s not do such a silly thing, ok?

Bad debt is money you borrow to finance to buy things you don’t need or can afford to impress people that could care less. These things do not produce income or grow in value – they are not assets. Things like clothes, dinner out, vacations, electronics, cars, and any other junk you don’t need.

In what order do you pay off debt?

The worst of the bunch is any debt from a payday lending/car title place. I hope you do not have any debt from these places, but if you do you need to pay off those people as soon as you can!

So you don’t have any loans from these places, good for you! Which debt is next?


What? I thought we were paying off our debts! We are, but first we are putting together a small emergency fund of $1000-1500 in case we hit any problems. Now we have a bit of a safety net to fall back on if trouble comes a’knockin’.

Next you will pay off the highest interest rate loans you have, probably credit cards. Credit cards can easily run in the 20%+ interest rate range. List these out by amount and interest rate. You can grab this information from your monthly statement or online. If you can’t find that information, give them a call.

Doubling Dollars Credit Cards in Wallet
Credit card debt is one you pay off as fast and as hard as you can. Go nuts. 20% is an outrageous interest rate, it will ensure you are paying this off for years if you only make the minimum payments. The interest you are paying is your life! You trade hours of your life for money to just hand this over because you wanted something before you could afford it.

So buckle up. Kill off any excess spending other than your basic expenses. Funnel this money into your highest interest rate debt while making minimum payments on the rest.

Speed up the process by obtaining extra income or selling things you no longer have a use for. Get a second job or find a side hustle that you can do, there are so many in our modern gig economy. I have made thousands of dollars as a secret shopper and selling things on eBay.

The more you are working the less time you have to be bored and spend money!

As you pay off each loan, roll all the money into the next one and then the next. The debt payoff train will not be stopped until it reaches the final station!

Pay Off Debt

Ok, so you hustled your butt off to pay off debt – congratulations! What now?

Now you can increase your emergency fund to a few months of expenses and then start paying off debts like any student or medical loans , as well as start investing for your future. If you are lucky enough to have a job with retirement plan matching you will want to put at least that amount in while you are still paying off any remaining debt up to your mortgage.

So if you get a 3% match, you will contribute at least the 3%. It is a great benefit that you should take advantage of. You can put more aside if you wish.

If you don’t work where you get a match then you should put some money aside each money to fund your yearly IRA, probably the Roth IRA. The annual contribution limit is $5,500 per year, aim for a minimum of $1,000 saved to transfer into this retirement account per year while you are still paying off debts up to your home mortgage (if you have one). This is only about $83 a month to put aside, very achievable.

When your only debt is your home mortgage you can step up your investing game. Aim to save at least 15% of your income specifically for retirement accounts, the more the better. Remember that this money is going away and is hard to get to until you turn 59 ½ years old.

Doubling Dollars Home Loan

Now you have more choices as you are in a much better position.

You have all this cash that you haven’t been spending since you have been paying off your debts. At least 15% of your income has been directed to invest in your future, and only owe money on your house.

  • If you don’t have a mortgage, but want to become a home owner you can start to save up a 20% down payment to avoid having to pay PMI.
  • If you hate paying interest like me, or just want the peace of mind of having no mortgage on your home, you can attack it with all your remaining funds.
  • Like seeing your investments grow more than seeing your mortgage shrink? You can increase your retirement allocations to a higher percentage.

That’s it. There is no secret. You just have to change your mindset about money. It is simple, but not easy. When you have no payments, the wealth you can generate is immense. It won’t appear overnight, but as long as you keep on fueling the train it will take you to the station you set as your goal.

Doubling Dollars Stacking Coins
Close your eyes and imagine a day when you owe money to no one. Everything that hits your bank account is your to do with as you wish. You have no debt – no credit card bills, no car payments, and no mortgage payments. How fast could you become wealthy? Fill your mind with that desire. Obtain it.

You are the conductor of this train, and only you can control what happens.

For a free step by step guide on how to start budgeting – click here!

This post originally appeared on my Steemit blog.

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