Paying off all your debt fast by leveraging the community is certainly an unusual way. But if managed well, it could be extremely effective especially if you have a low income. Indeed, during the journey to pay off your debt fast, any help should be welcomed. Nonetheless, keep in mind you are not the only person with a debt burden. Regrettably, with about an average of $38k debt owed by Americans, debt is putting us behind and down. Certainly, they are many ways to pay off debt fast.
Yet, leveraging the power of the community is a very effective way to be debt-free if done with people who have your best interest in mind. In this article, you will learn what it takes to make it happen.
What is debt?
Typically, debt is described as any money you owed to a person or a business. The keyword here is Money you owe and no! It doesn’t go away. At some point in life, almost everyone’s subject to experience some kind of debt. This can hold you back seriously and affect your ability to focus, in some cases destroy you emotionally.
For example, ongoing bills such as electricity, phone bills, insurance, grocery, or utility bills aren’t considered as debt yet. They will become as soon as you received the bill.
Nevertheless, we can list as debt the following:
- Student loans
- Credit card
- medical debt
- home equity loans
- payday loans
- personal loans
- IRS and government debt
The first step in paying your debt is being honest with yourself, acknowledging how much money exactly you owe. Do a personal financial balance sheet. You should first and foremost start with budgeting. This will help you get a reality check and assess the amount of time you need to pay off your debt fast.
It is true that paying off your debt fast requires sacrifices and dedication. But it should be an impossible task. People have done it before and there is not reason why you couldn’t.
Yes, we can’t totally be debt-free in a modern society but at least we can bring it to a level that correlates with our financial abilities.
Pay off all your debt fast individually
The snowball method is probably the most effective method. Indeed strictly follow these steps. But first, clear things and put yourself in a position of success. If you want to pay off your debt fast, you will need to set up the right mindset. The journey is going to be hard, both emotionally, and perhaps physically. In some cases, your social life is going to take a hit.
A. Stop taking any more debts
The most important step toward your journey to financial freedom, is to stop creating new debt. Accurately,it is challenging but you won’t be able to get out of debt if you don’t stop. Be strong and bold. Be firmed with your goal and take a strong 💪 stand.
- Cut up your credit card or freeze it.
- Limit the use of your debit card
- Use cash only
Make a budget of what you need on a month by month basis not weekly. Then withdraw the cash you need for your entire month. Put them in separate envelopes and keep them somewhere safe in at your house. For instance, a separate envelope for groceries, another one for entertainment, and a separate envelope for gas. Chances are it is going to be extremely challenging at first. Probably, you won’t follow through the first 3 months but in the end, if you don’t give up, you will find it extremely worthwhile.
B. Evaluate your current debt situation
- Buy a special notebook dedicated to the exercise
- Take a day off and find a calm place
- On the cover of the notebook labeled it “Debt payment book”
- In the first page write ” My name is…. and this is my debt payment book”
- Skip a page
- On the following page start by drawing 3 columns: Column 1: list all debt you have, column 2: list the amount, column 3: minimum payment required, Column 4: timeline
- Then draw another table to summarize the entire information: start with the least amount and the closest deadline then finish with the maximum amount and the furthest deadline.
- Take a short break of 5 minutes
- On the following page draw a table that lists Column 1: all your source of income, Column 2: the amount, Column 3: timeline ( now vs future)
- Then match debt payment with income sources again starting with the smallest to the maximum.
- If you have just one income stream as most people, distribute your debt by aggressively paying the smallest debt and making minimum payments on the rest. Perhaps you will need to take some harsh decisions about your lifestyle and expenses. For example by cutting certain things.
- The remain debts usually the largest make minimum payments
C. Set up payment plans and schedule
Pick up your phone and make payment arrangements. Get everything connected to your bank account automatically.
During difficult months, everybody has one, do everything possible from the best of your capabilities to cover at least the minimum payment on every single debt you have.
On the flip side, when you have a good month with excess cash, put down a little more money towards your debt payment.
D. Make some extra money
To pay your debt fast, you need to make more money. The more source of income you have the better you are in general at least financially. The more money you take home, the faster you can pay your debt off. You can literally redirect your extra paycheck from your extra job solely to pay for your debt.
There are so many ways to earn extra money. The possibilities are endless. Just challenge yourself with a little effort. Arguably, this extra effort is just temporary.
Pay off your debt fast by leveraging the community
When people come together there is no limit to what they can achieve. Yet, our society has conditioned us to always fight for ourselves. As a result, when we face challenges, we tend to look toward one direction in search of a solution. But a community-oriented approach can help us be debt free fast. So, how can we do that?
If your Dad, mom, sister, brothers, cousins, aunt, grandparents, etc… chip in maybe $50 per month then you & your boyfriend/husband add yours. You will find yourself with more than enough money for your minimum monthly payment. Notwithstanding, The motivation here is to help all family members quickly get out of debt and build sustainable wealth. But, if you think $50 per person is high think of how much is spent per month eating out, traveling, coffee, or drinks. It is all about the interest of the family and relatives. A strong family means happy people.
2. Credit Card Rewards
Every time you use it you are accumulating points. Again, you can turn out and maximize those options by asking your roommate/family every month to do purchases and accumulate rewards for all with a single card. The credit reward is then redeemed and put towards debt payment. You organize it as a circle with each member of the community waiting for their turn.
3. Saving accounts
Some savings account can actually yield a very high-interest rate if you keep in a certain limit for a minimum duration. For example, Goldman Sack saving account interest rate is 2,25%. Then imagine if you have $50k per month that’s an interesting $1125 per month. The principle here anew with your close circle is to open an account with at least the minimum amount require and use the interest generated to put towards debt and rotate that operation for every member of the circle.
4. Lending Circles
In some cultures, money circles are a way of life. Every person goes through an initiation phase from childhood. More than an association of individuals, they stand by yourself each time you need them. The bound enables them to get access to financial services at an unbeatable interest rate. Nobody is left behind and aside.
5. Debt buddy
Find a buddy, a person that is in the same mindset as you are, and motivate each other to stay on track and always call each other out. That way you will not feel alone and you will have the support system in place to achieve your financial goal. Some people need that extra push and that constant reminder to be careful with money. That is when a debt buddy comes in handy. If you can’t find one you can always join one of numerous money management programs out there.
In conclusion, this method is a very fast and reliable way to be debt-free. But, It requires focus and people who share common goals and values.
Nevertheless, no matter the method that you choose, you will need to work in the long term, as it would require patience, determination, and focus to achieve your goals. No matter the method or strategy you choose. It all depends on you, on your determination to make it happen.