how to reduce debt fast

How to Reduce Debt Fast & Achieve Financial Freedom

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Who else wants to know how to reduce debt fast?

It feels good to have a mountain of debt lifted off of your shoulders. Once you get everything paid off – or at least paid down to a highly manageable minimum, life will be so much better. Learning how to aggressively pay off debt will transform your financial future.

Having some debt is a given in American society – such as a mortgage or a car payment. You can pay cash for those things, too – but at the very least you want to minimize your revolving credit.

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Start by Figuring Out Everything You Owe

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The first step in figuring out how to reduce debt fast is to know where you stand. You don’t want to just pay bills as they arrive in your mailbox. You need an overview of precisely how much you owe total, including a broken down amount.

It’s important to organize your debt. You can do it using a debt tracker with a pen and paper.  Alternatively, you can create a spreadsheet on your computer using a tool like Excel.

You want to know several things about your debt:

  • The current total amount due
  • The available credit
  • The minimum payment due
  • The percentage rate you’re being charged.

Add up everything – including credit cards, money you owe to family or friends, medical bills, tuition, etc. Don’t guess these numbers – look at your current statement. You can also call for a current credit card balance in case you’ve charged more since the last one was mailed out.                

Make it a point to stop spending on your lines of credit that day. You want the arrow pointing down, not up in terms of what you owe to creditors and lenders. Pay cash for things from this point on.

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You may also want to track your monthly expenses. This could include things such as:

  • Electric bill
  • Water bill
  • Cable TV
  • Internet Service
  • Phone bill

Write down other monthly expenses, such as:

  • Gas
  • Groceries
  • Haircuts
  • Clothing

This helps you see what exactly where your money has to go each month. It might shock you to see it all laid out in front of you. Especially if you’re used to juggling bills and living paycheck to paycheck. Now you’re ready to work on a debt management plan.

2 Ways to Pay off debt Fast & Eliminate Credit Card Debt

how to reduce debt fast

Credit card debt affects millions of people and robs them of their financial futures. A lot of the blame can be placed on the credit card issuers who make it as easy as possible to apply for a credit card.

Attractive discounts, coupons, perks, etc. are given to hook potential customers. Once these folks have their credit cards, they go wild – forgetting that they’ll need to pay back the credit used.

They assume that they can just pay off the minimums and they’ll slowly settle the outstanding balance. What many people don’t factor in is the interest rate that comes along with these credit cards.

You could pay your minimum amount and interest on your credit card for years and not make a dent on the amount of credit you used. Should you miss a payment, you’ll need to pay late payment fees. Over and above that, there may be higher interest charged too.

The banks know exactly what they’re doing and will do whatever it takes to keep you spiralling deeper into debt – paying more and more in interest and fees.

You’ll be in financial servitude to these financial institutions for years – but ONLY if you let them get away with it. Paying off debt fast is possible if you know how!

Put an end to credit card debt

how to reduce debt fast

If you’re sick and tired of the never-ending credit card bills and calls from the banks, it’s time to be proactive and take a stand.

Get a piece of paper and write down the outstanding balances on all the credit cards you have. Write down the interest rates charged for each card too.

Now, you need to adopt 1 of 2 methods to pay off the credit card debt. If you only have one credit card, you don’t need the methods below. Just pay your bill on time and always pay MORE than the minimum sum.

Even $50-$100 more makes a difference and you’ll reduce the amount you’re paying towards interest and also help to diminish your outstanding balance.

Method #1 – The debt snowball method to pay debt fast

how to reduce debt fast

The debt snowball method will require you to pay the minimum sum on all your accounts EXCEPT the smallest loan. You’ll pay more for this loan.

For example, if you have 3 credit cards and you owe $2,000, $1,000 and $700 to each card respectively…

You’d pay the minimums for the first 2 cards. However, for the 3rd card which has an outstanding balance of $700, you’ll pay more than the minimum. In fact, you’ll try to pay as much as possible.

Your goal will be to settle off this $700 outstanding balance FIRST… because it’s the smallest amount.

Once this $700 is paid up, you’ll carry on paying the minimum for the $2000 balance… BUT now, you’ll use the extra money you have (from not having to pay for the 3rd card) to pay off the $1000 balance.

So now, your goal will be to pay as much as you can towards the $1,000 balance and eliminate it. Once that’s done, you’ll move on to the final $2K balance.

This is why it’s called a ‘snowball’. You’re rolling your way towards the biggest debt.

There are a few pros and cons with the debt snowball method. The biggest advantage it has is that it motivates people. You feel inspired when you clear off the smaller debts. You can see the debt diminishing.

However, your debt elimination plan can take years, especially if the biggest outstanding balance you have is formidable. You’ll also end up paying more in interest

Which is why, the second method is recommended…

Method #2 – The debt avalanche method to pay off debt faster (RECOMMENDED)

how to reduce debt fast

With the debt avalanche method, you’ll order your credit cards by their interest rates… and focus on eliminating the debt which has the highest INTEREST rate first. The focus here is on the interest and not the outstanding balance.

For example, if you owe $500 on one card with a 9% interest rate, but you owe $2,000 on another card with a 16% interest rate, you will focus on paying the $2,000 balance first.

It doesn’t matter if it’s easier to pay off $500. You’ll still focus on the $2,000 because you’ll be saving money when you clear off the debt with higher interest.

This will mean that while on the surface, you can’t feel good about quickly paying off a small debt, in the long run, you’ll pay off all your outstanding debt much faster.

So here is how it works to pay debt off fast

You’ll pay the minimum on all your balances EXCEPT the one with the HIGHEST interest rate. You’ll pay as much as you can for this card until it’s paid up. Then you’ll move on to the card with the next highest interest rate and so on.

The advantage of the debt avalanche method is that you’ll save a lot more money (from paying less interest) and be able to pay off your debt even quicker.

The downside is that you’ll need discipline because this method will not motivate you, especially if the outstanding balance is huge for the high interest card and it seems to be taking ages to settle it.

However, once you pay off the huge debt, and start using the excess money you have to pay off the next one, you’ll see how AMAZING this method is.

The magic comes later, but when it does, you’ll be blown away.

You’ll settle the second card faster… and the third one even faster. That’s why it’s called an avalanche. You gain momentum with time. This method of debt repayment is highly recommended.

Decide which method will work well for you and use it to reduce your debt. The sooner you start, the better.

how to reduce debt fast

Decide How You Want to Pay Things Off


There are two lines of thought in approaching how you should pay off debt. Both are considered effective methods. Snowball means you start small and end up on a roll, making bigger payments. Learn how to reduce debt faster with the method that will work bets for you.

The first method is widely approved by financial experts. It involves you going to that list of debt that you created and listing it in order of highest to lowest interest rate.

This means you pay off the card with the highest interest rate first, which saves you money in the long-run because you’re no longer paying that high rate. This is sound advice, but there’s another method you might want to consider.

So for example, your list might look like this:

  • Visa 99%
  • Mastercard 23%
  • American Express 15%

You can list your debt in order from smallest amount owed on your credit cards to largest amount owed. The idea here is that you’ll find it very motivating to see a credit card paid off in full – and that frees up a minimum payment that you then apply to the next smallest credit card in your list.

Both methods  are good – only you can decide which approach would better suit you. If you want to cheer yourself on and celebrate each milestone, then option #2 might work better for you.

If finances are of utmost importance, then you might want the first option – because you can celebrate the money you’re saving in interest.

But pick a plan and then work it.

Create a Family Budget and Stick to It

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Without a family budget, you won’t make much progress in how you pay off your debt – no matter which option you choose. You know how dieting is all about calories in – calories out?

Well money is no different.  You want to spend less than you earn. Just as you listed your debt so that you could see it all spelled out for you, you have to do the same with your family money.

Use a budget planner to write down what you earn and what your spouse earns. Pool all sources, including child support or alimony if you’re divorced. Add up the incoming monies and compare it to the debt that you have in regards to minimum payments.

You want to tally up everything – school fees or activities, parties, and fun things you do as a family. You might need to go back through past statements to see what you’ve spent on discretionary items.

You’re going to want to start building up a bit of a buffer or an emergency fund. You don’t want to make arrangements to spend every last cent – when something unexpected might pop up that you have to address.

If you realize that you have too many bills all piling up at one time of the month, you can contact your lenders and ask for a new due date or billing cycle. This can help if you and your spouse get paid twice monthly, or weekly rather than one monthly payment.

As you start to get debt paid off, it’s important that you update your monthly budget to adjust for things you’ve paid off or paid down – or when you have more money coming in.

Figure Out How You Can Earn More and Spend Less

First let’s talk about cutting down on your expenses. When you’re serious about debt reduction, you have to feel the belt tightening – or else you’re not doing everything you can to get out of debt fast enough!

Here are some things you can do to cut costs and save more money that you can put towards old debt:

  • Get rid of unnecessary expenditures.

how to reduce debt fastFor example, do you really need the newspaper? Can you go online and read the news or watch it on TV instead? How about bottled water delivered to your doorstep – is it a luxury you can do without temporarily?

Do you have a landline and a cell phone bill? Would it be possible to get rid of your landline phone service and just go with a cell phone for the time being? If so, that’s one less payment each month.

  • Cut back on existing packages.

how to reduce debt fastCable TV is a budget buster. You might spend hundreds of dollars getting tons of movie channels and special packages for sports and entertainment. Cut back to a basic plan. If you need to, invest in a Netflix account for much less than you would a cable TV package.

If you can bundle things to save money, do it. For example, you might have your phone, cable TV and Internet service all with different companies. You can save money by bundling it with one provider.

  • Save on electricity and water.

how to reduce debt fastMake sure you (and everyone in your family) understands the importance of shutting off lights and conserving electricity for your monthly bills. Same with water usage – don’t let the water run while brushing your teeth, and don’t do small loads of dishes and laundry – wait until you have a full load.

  • Quit eating out.

how to reduce debt fastEating out at restaurants doesn’t help you stick to a budget. It might help you save time stopping by for fast food, but it can wreak havoc on your pocketbook and monthly budget.


  • See who is charging you more.

how to reduce debt fastIf you have credit cards that are charging you annual fees, you can request that those be waived. Otherwise, you might want to shop elsewhere for a different line of credit with no fee.

You also want to check things like your bank accounts to see if they’re charging you a monthly fee for using their service. There are some banks that will do away with this charge to keep you as a customer.

  • Make a meal plan.

how to reduce debt fastPeople who shop without a list tend to spend more than people who make a weekly meal plan and budget for their families. Shop based on whatever coupons your local store is offering in the weekly paper.

Make sure you pack lunches instead of eating out at work. As Dave Ramsey says, you can live on beans and rice while you’re paying off your debt if you’re serious about it.

  • Look for cheaper forms of entertainment.

how to reduce debt fastDon’t have an official date night out every weekend where you’re shelling out for an expensive dinner and a movie. Instead, invite other couples over and have game night at your house with snacks and wine!

Once you have seen how you can spend less, look at how to make extra money to pay off debt. The options are endless.  You can get a second job, start a side-hustle, host garage sales, or sign up for programs where you host parties and earn money. You can also make money working from home online  and put all that extra dough toward your old debt.

Once You Get Out of Debt, Stay There!

The most important thing to remember is that once you start digging your way out of debt, you can’t fall back into the old trap a second time (or third of fourth). Some people find spending is a hard habit to break.

When you pay off your debt, you might find it hard to see all of that available credit and try to resists the urge to charge your cards up again. But a better way would be to save up the cash and spend it that way.

Using cash for purchases can often save you money – not just in the absence of interest charges – but because retailers will sometimes give you a discount when you pay cash.

Save up an emergency fund that covers at least 3 months’ worth of your necessary payments. That way, you’re covered in case you have an issue that lasts longer than a few days off work – or an emergency pops up that you weren’t prepared for.

Exposed! Why Debt is an Addiction

We’ve all heard of drugs being addictive, but most people don’t realize that debt is an addiction too. It’s a symptom of a larger problem.

You may have noticed that people who are deep in debt very often try to ignore the problem thinking it will go away. Instead of spending less, they spend more. They are like gambling addicts on a losing streak who keep making bets rather than ‘waking up’ and walking away from the table.

There’s a reason for this…

How dopamine affects your spending habits

how to reduce debt fast

Just like how sugar addicts feel happy when they eat a sugary doughnut or a drug addict who gets high after a hit – someone who is addicted to spending money will experience a fleeting sense of happiness when they make a purchase.

They’re equating buying items to happiness. Many people believe that having an expensive car or a big house means that they’re successful. This idea of ‘arriving’ at the gates of success makes thousands of people live and spend beyond their means.

The end result is massive debt which drowns them in a sea of never-ending bills, calls from creditors and financial stress.

How to break this addiction

The first step is to tell yourself that you’re not a failure in life. There’s no item that you can buy that can make you feel successful. Happiness is something that comes from within.

If you’re in debt, spending more will make you feel good in the short term, but it will come back to bite you. Junk spending always worsens the problem. Seeking relief in the cause of the problem is unwise.

Spending money on someone will not buy their love either. Very often, people make the mistake of taking on debt to shower their partner with gifts. This is a vicious cycle if you follow it – after all, where does it end?

The gifts will need to get bigger, and since more than 50% of all relationships end on the rocks, you might be stuck with the debt long after your partner has left.

Remember to Create A Budget ( And Stick to It!)

how to reduce debt fast

Were already mentioned the need for a budget. You’ll also want to create a budget for yourself and (More importantly) stick to it. Getting out of debt fast is possible if you reign in your expenses.

Spend only on your needs and not your wants. Cut up your credit cards, if you can’t control yourself. You can always ask for replacement cards later, when you’re out of debt.

Always pay with cash. It’ll make you realize how much money is actually slipping out of your hands. A rule of thumb – if you can’t afford it, don’t buy it.

Don’t start doing mental calculations as to how you can pay for it in instalments or how you can stretch your budget to accommodate this new purchase. You don’t need it right now.

It’s important to realize that if you feel happy when you buy things, there’s actually a void in your life, and you’re using shopping as a form of therapy. As brutal as this sounds, it should give you pause and make you contemplate.

If you feel shameful or miserable after the initial high of a purchase diminishes, there are emotional issues you MUST deal with. The same applies for stress, fear, guilt, evasiveness, etc. These negative feelings which arise when you’re in debt must be examined.

When you understand why you’re doing what you’re doing, you’ll be able to put an end to the problem.

Start Right Now!

Last but not least, the best way to get out of debt fast is to start today – and find ways to fix the problem.

This is an addiction that can be broken… and once you break it, you’ll be truly happy and no longer a slave to the creditors. The freedom and ‘lightness’ you’ll feel from no longer being in financial bondage is priceless.

It all starts with you… and it all starts right now.

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