People Who Paid Off Thousands in Debt Share Top Saving Strategies – Business Insider
Paying down debt can feel daunting — especially today, when your dollar buys less than it used to thanks to high inflation.
However, it’s entirely possible to get out of the red without feeling completely cash-strapped.
But don’t take our word for it: Insider has spoken with dozens of couples and individuals who have tackled their debt while still feeling like they can live their lives.
Below, we’ve rounded up three of their top strategies.
Most individuals and couples that Insider spoke with started by creating a budget to understand exactly where their money was going each month.
Alexis and Neiko Johnson, who paid off $460,000 in debt in just under four years, used Dave Ramsey’s budgeting app EveryDollar to keep their spending under control. It allows you to input your income, debt, and expenses, and then shows you the excess amount of money you have each month after subtracting expenses and debt payments from income. Whatever that amount was at the end of each month, they put towards the debt they were focusing on paying down at the time.
While they were mindful of their spending habits, they didn’t completely deprive themselves.
“Some months we would get dinner or buy a pair of jeans, but it would be like $100 a month,” said Nikko. “That kept us motivated. We were still living life and staying focused at the same time.”
Fewer splurges meant more appreciation for when they did spend their money, he added: “When we went out to eat for $50 it felt like a $500 dinner.”
Laurie-Anne King, who paid off $45,000 in student loans and credit card debt, now helps thousands of other women tackle their debt through Dow Janes, a financial education platform that she co-founded with her friend Britt Baker.
The crux of the debt-payoff strategy she and Baker teach in their financial literacy course is what they call the “aligned money method.”
Rather than focusing on cutting back and sacrificing certain things in order to become debt-free, this approach is centered around spending money that aligns with your values. In order to do that, you first have to understand what’s important to you. Maybe it’s gaining new experiences by traveling or buying healthy foods or spending money on a gym membership.
Once you’ve thought about what you truly value, spend your money (within reason) in those areas and cut back everywhere else.
That way, “you’ll be focused on spending better instead of just spending less,” said King.
When their clients start doing this, King and Baker have found that “people end up saving way more money than they were saving before, while also doing things they didn’t think they could do before.”
Plus, it’ll be much easier to stick with your budget if you give yourself room to spend some of your hard-earned money.
The aligned money method “doesn’t require you to sacrifice or make all of these trade-offs in the short- term for a hopeful future payout,” said King. “You feel better now while also doing better for your future self.”
Ali and Josh Lupo paid off $102,000 worth of debt on social worker salaries. They did so thanks to creating additional income streams, but also by focusing on keeping their three main expenses — housing, transportation, and food — in check.
“We’re conditioned to cut out the smallest expenses, like Netflix or coffee or dining out,” said Josh. But that’s not always the most effective way to save: “If you learn how to master those big expenses, it will free up a ton of money so you don’t have to stress about the small stuff.”
Trimming the major expenses might require upfront sacrifice — maybe you get rid of or downgrade your car, or move in with roommates to save on housing — but it’ll pay off in the long run and allow you to spend guilt-free on things like your morning coffee or going to the movies.
Think about it this way: If you’re spending $2,000 a month on rent and find a way to cut that in half by moving in with roommates, that’s $1,000 extra in your pocket each month. If, instead, you stop going out to dinner with your friends to save $30 a week, that’s $120 in savings over a month.
Focus on the big expenses. You’ll not only boost your savings significantly and get out of debt quicker, but you’ll stress less about your day-to-day spending.