How to pay off $10,000 in a year

When I was younger I would see something I liked and I would buy it.  It really was that simple – I had a lovely lifestyle and a huge amount of debt. I had great friends, we would do breakfast, go shopping, go clubbing . Whatever we wanted and then occasionally I would go to Uni. But that lovely lifestyle costed a lot of money that I wasn’t making.  I worked part-time at Coles but that wasn’t enough for my champagne lifestyle so I got myself a credit card, and then another one.  You can see a pattern – I don’t need to go on!  But fast forward to when I met my now husband and things were not looking great for my finances.  So I had to pay off $10000 in a year.

I was roughly in about $23, 000 debt. A couple of credit cards, a car loan and a loan from my sister (I had a lovely 6 week European holiday!) and I was tapped out! My now husband (My Minister of Finance) was mortified! So I needed to clean up my act quickly! We bought a house after dating for 8 months, and we were in tough times because I was finishing uni and had to drop back my hours at work.  So after I graduated it was time to as my father would say “tighten the belt” and sort out my finances. So I focused on paying off as much as I could as fast as I could – I paid off just over $12,000 in the first year after graduation.  Here is how I paid $10000 of debt off.

paying off debt quickly
paying off debt quickly

How to pay off debt

  1. Set a goal and stick with it.  Don’t stick your head in the sand and think that it will go away or you will win lotto.  Chances are you won’t and you will have wasted precious time.
  2. Live within your means! – no more credit cards!!! Cut them up – that’s it. If your serious you need to stop over spending ASAP.
  3. Start and use your budget ASAP. (You will need roughly $200 per week just for debt)
  4. I combined my credit cards into one – massive help.  Although it’s annoying I also shopped around for rates.  I was a stickler for interest free and then a month before it ran out I would apply for another interest free and transfer over.  Is it a hassle? YES Is it worth the hassle? YES YES YES. By not paying any interest you are paying off your debt quicker and you can pay off more.  So you are saving money on interest but you are also saving money on fees by only having one card.
  5. Combine other debts if you can or have to, but only if you are going to be able to pay them out and not be penalised or have huge account fees.
  6. prioritise your debt – you will need current balances and the interest rates they are attracting. Also keep in mind any interest free periods that may be close to expiring (the interest rate after the interest free period is often extremely high).  Organise from highest interest down to lowest interest.  If you have two or more debts with the same interest rate organise them from smallest amount to largest amount.
  7. Make a list of the order and amounts to pay off.  Put it up somewhere, in your study, next to your fridge, beside the bed so you have a visual.  I would cross each one off when paid off, so I could see how close I was getting to my goal.
  8. Start paying them off, you will need to have these built into your budget. But by starting with the highest interest rate you are saving future interest, by paying off the smallest amount first is to inspire you to keep going by getting results sooner.
  9. Once you have paid off one, roll that amount into the next debt on your list to keep up momentum.
  10. At the end of your pay week pay week I would always use any extra in my allowance account. (my own spending account – I get $50 per week) To pay off a credit card up to an even $10.  So say my balance was $657.56 on my credit card -over and above anything else I had paid that week I would pay off the $7.56.  Not a massive amount but that was the point.  Out of my little spending account I hardly noticed but it could add up to nearly $500 extra every year that you have paid off!  And if you are paying interest long-term it is even more!
  11. Any extra money goes into the debt – your tax return, overtime, pay rise, side jobs every little bit helps! Check out some side jobs here. I got myself a second job, packing boxes in a factory.  Not the most interesting job in the world but it was flexible hours so 2 afternoons a week I would work after my ‘real job’ for 3 hours. I bought in just under $100 and that went straight on my debt.

So after a tight year I paid off $12,000 from my debt.  I still had a little way to go (ok half) but I beat my goal and I was happy with that.  After that I continued to pay off my debt by using interest free credit cards.  Then I prioritising them and using any extra money to pay them off.  I no longer worked my extra job but instead looked for other ways to make money at home and continued to pay off as much as possible.

I hope this inspires you to start paying off your debts so you can start saving and living! Once you have paid off your debt it is a wonderful feeling to be able to buy something knowing that it is all yours!

Do you have any other tips on paying off your debt quickly? Happy saving! I hope this helps you pay off $10000 in a year.

Budget Mum Blog