Those that are serious do more than the minimum to pay off debt to save big on interest and finish paying off loans more quickly, allowing them to focus on other money priorities.
Here’s how recent grads that are desperate to be debt-free think, plan, and act differently than those that just mail in a check each month.
1. They know why they want to be debt-free
Most people aren’t actually motivated simply to become debt-free. What they really want is to end monthly payments to creditors. Dig a little deeper, and there could even be other desires, like saving for a house or starting to invest for retirement.
Take some time to decide on your personal reason for getting out of debt. Write it down and remind yourself regularly by sticking a note on your mirror with the best motivation you have to become debt-free.
2. They budget for their debt
Those working to pay down debt realize there’s no substitute for having a budget, especially when every dollar you spend can impact on how much goes towards debt payments. Planning is important, and mapping out debt payment gives a clear path to wiping out any loans.
Keep a budget and keep it simple if you need to, but whatever method you choose, make sure it accounts for paying off debt each month.
3. They say ‘no’
To get ahead and conquer debt after college, those working hardest to be debt-free realize they can’t simply do what everyone else does or says. Part of that is learning to say “no” to spending extra money.
Friends may spend Friday and Saturday nights hitting the clubs and living it up. Next week, they’re flying off on vacation. But just like trying to keep up with the Joneses, imitating how your friends spend can get you into trouble if you aren’t careful.
Learn to say “no” when your gut says you can’t and shouldn’t afford it.
4. They get creative
Those on the fastest path to being debt-free are creative in finding their way out. They realize the most effective ways to pay down debt are often the toughest and least desirable, but accept that their hunger to be debt-free means they can’t afford to take any option off the table.
They realize that taking a second job, even if only temporary, can pay off big. Paying just an extra $100 a month on a $20,000 student loan at 6.8% interest means a 42% savings on interest paid with a reduction of 3.8 years on the original 10-year term.
Consider drastic ideas like moving in with parents or giving up on vacations until your debts are paid off. None of these are fun, but that’s not the point if you’re dedicated to reaching the debt-free finish line.
5. They cut up credit cards
Those looking to get out of debt fast consider going cash only until they can get their money under control. They have cash available for emergencies instead of relying on credit in crises.
If you’ve had credit card problems in the past or know that you may be tempted to spend, put down the credit cards for a bit. It can’t do any harm, but it can bring big rewards.
6. They set up auto-pay on loans (and for more than the minimum)
Students looking to get debt-free fast take advantage of reductions in interest rates on student loans by setting up automatic payments. This can be a win-win, by planning ahead for making payments, which hopefully includes paying more than the minimum, as well as saving a little bit on interest.
Set up your loan and credit card repayments in a way that guarantees you’ll pay back the most you can afford before you spend the money elsewhere.
7. They’re clear on spending wants versus needs
A fusion of saying “no” and getting creative means separating needs from wants.
Despite what you may consider a “need” item, the aspiring debt-free grad realizes there are fewer things that you absolutely must have than sometimes imagined.
A smartphone, a big screen TV, and eating out are all wants that you could live without. Even a car is expensive and not 100% necessary, although many grads make it necessary by choosing a certain job or place to live.
The sooner you can divide the wants and needs, the easier time you’ll have realizing how much extra money you can be putting towards paying down debt.