We’ve talked about a few ways to save money on some recurring bills (like your cell phone, car insurancehome insurancebanking fees, etc).  So, now what??  In my case, I used those savings to wipe out our consumer debt.  If you want to do the same, here’s how:

  • Stop the bleeding – If you need credit to buy something, you can’t afford it, so don’t buy it. Seriously.  We *tried* our best not to incur any new debt while trying to pay off the debt we already had.
  • Build up an emergency fund – Use the savings from your lowered expenses to set aside some money in a separate savings account.  This money is for emergencies only (and no, wanting to treat yourself to new shoes is not an emergency), so that you won’t use credit in those situations.  Start with just $1K for now, then pay off your debt, then build it up some more.  We initially just put $1K aside, then paid off our debt, then built it up.  We now keep between $7.500 – $10,000 in savings (although this is still well short of 6 months worth of expenses, which is recommended by most financial experts). 
  • Slay those debts – Once you’ve got a little emergency fund going, use all of the savings to make extra payments on your debt – ie in addition to whatever payments you were already making.  As for the best order in which to pay off your debts, we’ll talk about that a bit more in a future post.  Once we had $1K in our emergency fund, we turned our attention to our debt payments.  At the time, we were paying $500 a  month on our debts.  I figured with the savings we’d managed and by tightening the proverbial belt, we could double that, so I contacted the bank and arranged to make $500 payments every 2 weeks (on payday) instead, meaning we would pay off $13K a year instead of $6K. 
  • Use cash windfalls to speed things up – I’m looking at you, income tax return.  And you, year-end bonus. I started this debt repayment process over 2 years ago, just before income tax return time. We got a bigger return than usual that year, but we didn’t blow it as per our usual routine.  Instead, we put $7K on the LOC.  Then in May, I got a bonus at work and used it to quickly kill what was left of my student loan.  During this time, we also sold a piece of land that we had no intention of using and added that chunk of change to the debt as well.
  • Settle in for the long haul – Unfortunately, even with big extra payments, getting out of debt can take YEARS… but stay the course, you’ll never regret freeing yourself from its shackles!  Despite our efforts to stop the bleeding – see above – we added to our LOC 4 times while trying to pay it off!  This slowed our repayment process (duh!)… But for a year and a half, we diligently made our payments (regular and extra) and watched the balances gradually get smaller and disappear one by one.  And then in September 2016, we made the last payment on our last debt!!  The best part – adding $1,000 to our monthly cash flow now that we no longer had to make those debt payments!
  • Stay out of it – Once you’re out of debt, avoid it like the plague  And you can, because once your debts are paid, all that money that was being spent paying down debt now stays in your pocket!!  And that money can now be put to good use saving for your next trip, your next car, whatever, so that you won’t need to tap into any credit the next time those expenses arise.  Now that we’re consumer debt free (we still have a mortgage), we invest most of that extra $1,000, and the rest gets put aside for emergencies, family trips and our next vehicle.  Because from now on, we wanna be the kind of people who pay cash for those big-ticket items!

Now, about that mortgage…