When you’re paying off debt, it is ESSENTIAL to reduce your expenses. As I explain in the interview with CNBC, one of my strategies for paying off my student loan debt was to keep my expenses low. I carried my own coffee, water, and snacks everywhere so I would not be tempted to make impulse purchases. I also embarked on no-cost adventures with friends. But, there is, of course, more to that story. Although it helps to cut your takeout habit, the BEST way to reduce your expenses is to beware of the big ones.
I’m talking about 1.) Housing, and 2.) Transportation.
The entire time I was paying off those loans, I was living with a roommate in a super low-cost situation.
I did not have a family of my own, beyond my two dogs. That’s why I always recommend getting serious about paying off your student loans when you’re YOUNG. Do it before your responsibilities grow. Live in a one bedroom apartment with five roommates if you have to. And that’s why you should do it when you’re young. You won’t want to live like that when you’re forty.
In addition to a low cost living situation, I did not have a car payment. I was driving my fourteen-year-old Honda. I’m still driving it, one full year after paying off the debt. I’ll drive it until it won’t drive at all. If I lived in a city with light rail, I may not own a car at all. They are expensive! If you can avoid part of that expense while you’re paying off your debt, then you’ll make much faster progress.
It’s the big expenses that take up the bulk of our incomes. When I was making monster payments, I had a lot more money left over after paying for the two big expenses because they weren’t so big. For housing, I paid around $500 a month for both rent and utilities. For transportation, I paid less than $100 a month for insurance and gasoline. That’s $600 for my big expenses. Most months during my debt payoff project, my expenses totaled less than $1,300.
Now that I “own” a home, I pay close to that for a mortgage.
But let me be clear: if you have big expenses, it does not mean you’ll be in debt forever. You can find other ways to cut back, although reducing the two big expenses is the way to quicken the payoff. It may take longer than fourteen months to do it, but it’s possible.
You just have to want it.
My advice for anyone who wants to eliminate their debt is simple: want it, and beware the big expenses. Keep them as low as you can.