What Is The Best Way To Become Debt Free In A Few Years?

You just like me are probably here because you are tired of living in debt, wondering how to become debt free, to achieve financial freedom, to travel with your family and do all the other things you love without worrying about the making the next car payment.  I want to be a good example to our children, showing them by action the benefits of living debt free with no mortgage payments. 

The debt snowball plan, is probably the best way to become debt free. You pay your debts from smallest to biggest debt.  The debt snowball gives you a psychological boost when you see debt disappearing however small it is.  Using this method helps you focus on one debt at a time, keeping you motivated on your journey to become debt free.

I did some digging, and landed on Total Money Make Over, a book about how to get out of debt, using the snowball method.  I bought the book based on the thousands of positive reviews out there. I read it within two days, and i my views about how to handle money were instantly changed for the better. 

I am going to honest here, it was a tough pill to swallow, but i knew i needed to change my spending habits, if i wanted to become debt free. 

In this post, you are going to learn how to pay off your student and credit card debt using the snowball method. 

There are many people and families that  became debt free using the snowball plan. You do not have to follow Dave’s snowball method to the dot, tweak it to what suits your situation best. 

How can i pay off debt fast with a low income?

This article contains affiliate links. See our disclosure at the bottom of the page. 

How do you create a budget and get out of debt?

Write down all your monthly income

• Your combined net take-home pay for both of you and your spouse/partner.  This includes all your side job incomes, social security checks, etc. 

• Include all your regular bills like mortgage/rent, savings, electricity, food, gas, all your debt repayments and irregular bills like insurance payments or HOA. 

• Make a list of your debts (minus mortgage) smallest to largest

• Subtract all your expenses from your net income.  This is called a zero-based budget. The trick is to have every dollar accounted for.

• Once you have finished the budget, start tracking your expenses throughout the month. There are many personal personal budgeting tools out there to help you track your expenses.

• Budgeting can be challenging, but it is doable. Do not give up or beat yourself up when you fail. Keep trying. You will eventually get better at it. 

        <h3><a href="https://stashingcoins.com">You need an emergency fund, while paying off debt</a></h3>      
    <ul><li>Before you start paying off debt, you need emergency  savings set aside to act as a safety net when life throws at you that wasn’t expected.  </li></ul><ul><li>Car breaks down, loss of income, emergency hospital visit with subsequent high medical bill, or your water heater breaks down.</li></ul><p style="padding-left: 40px;">You get the idea, basically anything that is unplanned.  </p><ul><li>Without an emergency fund, the alternative will be credit card debt or loans to pay for these unforeseen expenses.  </li></ul>      
                                        <a data-elementor-open-lightbox="" href="https://stashingcoins.com">
                        <img src="https://www.stashingcoins.com/wp-content/uploads/2018/10/You-need-an-emergency-fund-800x500.jpg" title="Emergency Fund" alt="An emergency fund helps you start paying off debt" />                                </a>
    <p>Then life continues to be a vicious circle accumulating more and more debt as emergencies arrive at our doorstep. </p>       
        <h4><a href="https://stashingcoins.com">How to create an emergency fund </a></h4>       
    <p>Now that we know what an emergency fund is and why we need one, the tough work begins of creating one.  </p><ul><li>If you don’t have any money set aside presently, it is suggested to begin with $1,000 for an emergency fund.</li></ul><p style="padding-left: 40px;">This will be expanded later ideally to be 3, 6-8 months worth of expenses. </p>     
                                        <a data-elementor-open-lightbox="" href="https://stashingcoins.com">
                        <img src="https://www.stashingcoins.com/wp-content/uploads/2018/10/Tips-on-getting-started-on-your-emergency-fund-400x400.jpg" title="Crisis Fund" alt="An emergency fund helps avoid taking up new debt" />                                </a>
    <ul><li>It is recommended to keep your emergency funds in a  checking account (separate of your current checking), or a Money Market Savings account.  </li></ul><p style="padding-left: 40px;">Either of these accounts would allow for check writing, which is important to have for any emergency that arises. </p><ul><li>Some strong willed people, keep their emergency fund money is a <strong><a style="color: #0000ff;" href="https://amzn.to/2VumNcM" target="_blank" rel="noopener noreferrer">cash box</a></strong>.  I am not as strong willed, so i keep mine in a bank account, i only use the cash box for extra change. </li></ul>     
        <h4><a href="https://stashingcoins.com">Establishing an Emergency Fund

• Let’s explore some ways to get this $ 1,000 set aside. The first tip is to sell unused items around the house.  That’s right, most people have stuff  worth more $ 1,000 worth lying around the house that they no longer use. 

•  Start a list (spreadsheet), and list items along with the estimated resale value of each item.  It is a good idea to go room by room in order to prevent overload.

• Start in bedrooms, go one by one, move on to living room, into the kitchen, and keep on going until all the rooms in your home are done.  The spreadsheet will motivate you so that you can continue to see the running total of money you could make on all these items!

• If you aren’t sure the value of the products, you look them up on your phone in places such as; Craigslist, let go, and similar buy/sell apps.  

This can give you a good idea of demand for your products, and value of the products. 

The above mentioned apps are where you can list your products for sale, along with online marketplaces such as Ebay.

• Budgeting is a great way to build that emergency fund, especially building it beyond $1,000.  

• Without a budget, excess spending will always be present, since you aren’t “tracking” what is going out. 

• Dave Ramsey suggests the percentages below for those that are new to budgeting.

Get free budgeting sheets

How to get started on the snowball method

• For example,  start off with the smallest debt, a credit card with $400 balance, so rather than paying the minimum, you throw everything you can at it in the first month.

• If that isn’t enough to pay it off in the first month, then maybe the following month it is paid.

• Then you move on to your next smallest debt, and aggressively pay that one off, and continue on until the largest is paid.

• The reason this works is it helps you build momentum paying off the easier smaller ones. 

• You need to do everything you can to get that extra money, including the budgeting, getting an extra job and any additional sources of income to help you heap more money on the snowball.

How to pay off debt fast & save money

• Making extra payments on debt is a good strategy to get out of debt faster. However you need to do it correctly, so you do not waste any of your hard earned money.

• Experts say that you need to make sure that any extra payments you make go directly to reducing the principal, because this will ultimately reduce the amount of money you pay on interest of the said debt.

• When you just make extra payments, you are not lowering your interest, you are just paying it early, but if you pay directly to principal, then your interest will reduce. Does it make sense? I took  me a long time to figure this out, so i was kind of annoyed at how much money i wasted this way.

• For example, you owe $ 20,000 on your principal balance, your interest is not included in that amount.  You make regular payments of $200, $ 180 goes to principal and $20 goes to interest. 

Your balance is at $20920. Then you make an extra payment, it all goes to interest. Your principal balance stays the same, you just pay the interest on the loan earlier. Do you get the point?

• Paying Interest is how the banks make their money – their charge to you for using their money. The longer you hold on to the debt, the more interest you pay.  The faster you pay the debt, the less interest you pay. Of course it is easier said than done.

• The best way to do is make the actual payment, then wait a few days, make the extra payment. The second payment will go to the principal. 

• Some companies require that you call them after you have made the payment to specify that you would like the second payment to go to principal and not to interest. Check with your creditors on that.

        <h2><a href="https://stashingcoins.com">Dealing with Anxiety while on your debt free journey</a></h2>       
    <p>Aggressively paying off debt is scary, but staying in the comfort of debt is scarier.  It becomes easier with each payment you make. You can do it, you are on your way to build wealth.</p><ul><li>A part of Dave Ramsey’s philosophy is about becoming aware of our money habits, then doing something about them. </li></ul><ul><li>You might have anxiety about making the extra payments, but you get more comfort when seeing lots of money in your bank account.  </li></ul><ul><li>You could create a little security blanket. When doing your zero budget, leave $ 100 to cover any emergency. When not used, simply roll it over to the next pay period. </li></ul><ul><li>Ease yourself into it by paying half the amount and putting the other half into savings. It slowly grows your savings. </li></ul><ul><li>Many of us were taught that having debt was the way to go, letting someone own and take your money. It took me a long to understand that, but once i did, it got so much easier to pay off debt.</li></ul>     
        <h2><a href="https://stashingcoins.coins.com">What to do when your bills are more than your income?</a></h2>        
        <h3><a href="https://stashingcoins.com">Where to cut your expenses at home?</a></h3>        
    <p>Some people live a very frugal life paying off debt.&nbsp; Some go to extremes to save a buck here and there. Whatever rocks your boat. Remember not to put your health in danger.&nbsp;

Lower some of your typical expenses such as; monthly car payments, electricity, phone, internet, TV, money spent on groceries and rent/mortgage.

Lower your electric bill

Lower the interest being paid on  your car, or if that won’t save much, or isn’t an option due to credit, simply trade in your car for a lower priced car.

Perhaps paying $400 per month for a very nice car isn’t a true necessity, and you are able to lower that to $200 per month.  

• The $200 savings can be applied to build that $1,000 emergency fund.

                                        <a data-elementor-open-lightbox="" href="https://stashingcoins.com">
                        <img src="https://www.stashingcoins.com/wp-content/uploads/2018/10/Lower-your-electric-bill-1-400x400.jpg" title="Heating battery with piggy bank on it" alt="Bring your electric bill down to save money" />                               </a>
        <h5><a href="https://stashingcoins.com">Install a programmable thermostat</a></h5>      
    <p>Install in a programmable thermostat. Depending on where you live, you can even out the temperature in your home, to save money. </p><ul><li>Adjust your water heater in the warmer months. </li><li>Line dry your clothes during warmer months instead of using the dryer.</li></ul>        
        <h5><a href="https://stashingcoins.com">Consider moving to a less expensive apartment.</a></h5>     
    <p>Consider moving to another apartment that will cost less, and again, those savings can go towards building the $1,000 nest.  

Never move to a bad neighborhood for the sake of saving. Never compromise your security. 

Budget health meals

 Ramsey refers to this tip as the beans and rice. You may need to cut your grocery/food budget to make room for more money towards your debt payment.

Create a weekly menu

• Consult your family members about a weekly or biweekly menu.
• It saves you a lot of time and money.
• You can go about it two ways. You can plan your menu from your available grocery items; 
• Or you can your shopping depending on what is on your menu plan. 

• Mix up your menu with some frugal quick healthy meals that still save you money. 

Get our free meal planner

Learn how to cook from scratch

• Making your meals from scratch saves a lot of money.
•  Buy groceries in bulk, huge chunks of meat from places like Sam’s, Costco or Aldi. 

• Buy lots of fresh produce when it is in season, freeze it for later. 

Learn how to stockpile

• Stock up on groceries during sales or using coupons. 

• Stock up on one or two items item every week.  Stock up on dry pasta and pasta sauce this week. 

• You can stock up on detergent & cleaning supplies the following week.

• Switch out some brand name groceries with their generic versions. Many of them are as good only cheaper. 

The sacrifices above may be tough at first; to drive a cheaper different car, move out of your apartment, or part ways with some of your old stuff collecting dust. 

The reward of knowing you have $1,000+ set aside for emergencies will far outweigh the discomfort.

Related articles:

• How to decrease utility expenses
• 14 Things we stopped paying for and saved more money

• Dave Ramsey recommends living your debit card at home, and utilizing cash envelopes. Put in the amount of money into each. 

                                        <a data-elementor-open-lightbox="" href="https://stashingcoins.com">
                        <img width="300" height="200" src="https://www.stashingcoins.com/wp-content/uploads/2018/10/How-to-use-cash-envelopes-300x200.jpg" alt="Utilize cash envelopes instead of debit or credit card." srcset="https://www.stashingcoins.com/wp-content/uploads/2018/10/How-to-use-cash-envelopes-300x200.jpg 300w, https://www.stashingcoins.com/wp-content/uploads/2018/10/How-to-use-cash-envelopes-768x512.jpg 768w, https://www.stashingcoins.com/wp-content/uploads/2018/10/How-to-use-cash-envelopes.jpg 1000w" sizes="(max-width: 300px) 100vw, 300px" />                             </a>
    <ul><li>This way, you know when the Recreation funds are gone from the envelope, no more going to the Movies.</li></ul><ul>

<li>Don’t spend money you do NOT have.&nbsp;</li>

Related post:

Good budgeting software to help you manage your finances

        <h2><a href="https://stashingcoins.com">How to prepare yourself for unexpected costs while paying off debt</a></h2>     
    <p>Sinking fund is money set aside every month for the expected expenses. Things like birthdays, Christmas, Easter, car maintenance etc</p>     
        <h3><a href="https://stashingcoins.com">School expenses sinking fund</a></h3>       
    <p>Many times schools give short notice on upcoming stuff.  Put away a small amount you can afford. It covers everything that school asks for.

Field trips, book fairs, teachers’ gifts, birthday parties for classmates and school supplies at the beginning of the academic year. 

It is also wise to include the children in budget meetings, asking for their input on what they may need for school.

Kids sinking fund

For random things that kids need.  Explain the things to them that they do not to buy everything they think they need. 

If they do not understand that, they will run into problems. You can not plan for something you don’t even know they are going to need.

Do you have a challenge budgeting for stuff like reserving daycare places for your kid, clothes, hair cuts, tools,  and oil change because they are so sporadic. 

You could put away a certain amount of money per week for non expected bills.

Use any left over money at the end of the month, to pay off debt or roll it into your savings account. 

This will keep you from dipping into your emergency fund, help you find balance with your budget, while have the freedom to adjust easily.

How to prepare for a new baby while you pay off debt.

• While your aggressively paying off debt, your discover that your are expecting. Babies are a blessing, they mostly bring joy to the family, but i am going to just say it, they are really expensive.

• Much like the emergency fund, begin building your stork fund to anticipate all these baby & delivery expenses.  Otherwise, your emergency fund will be raided. 

• Dave recommends that you put your debt snowball on hold, pile all the monthly payments towards towards the coming baby. i.e stork mode.
• From diapers, baby clothing, formula, baby gear, unexpected neonatal stay, hospital bills, maternity wardrobe, car seat, stroller & maybe a bigger car.

• After mom, baby and other family members are settled in, the family budget is adjusted to accommodate the new baby demands; slowly go back to debt snowball. 

I am not yet debt free, but i am so happy i chose this path, i see the light at the end of the debt journey. It was tough at the start, i felt the pinch. But i got used to it after a while.  Many times i go over budget, i do not beat myself for it, i simply try again the following month. 

Keep the frugal habits after you have paid off your loans. Invest your money wisely. practicing your learned frugal habits, you will not be a debt situation again.

                                        <a data-elementor-open-lightbox="" href="https://stashingcoins.com">
                        <img src="https://www.stashingcoins.com/wp-content/uploads/elementor/thumbs/tried-and-tested-methods-ol2k8135vzjgpwtpmbsi0q7ulp5nvntt5fam9qhiao.jpg" title="tried and tested methods" alt="Become debt free in a few years." />                             </a>
                                        <a data-elementor-open-lightbox="" href="https://stashingcoins.com">
                        <img src="https://www.stashingcoins.com/wp-content/uploads/2018/04/How-to-become-debt-free-using-snowball-method.-300x600.png" title="How to become debt free using snowball method." alt="How to pay off debt using debt snowball" />                              </a>