You may be able to pay off your debt faster than you think, even if you don’t have a lot of extra cash.
Personal finance expert and author Tiffany “The Budgetnista” Aliche spoke at OneUnited OneTransaction, a talk on bridging the racial wealth gap, on his top tips for paying off debt. She recommended spending all the “unexpected money” on paying off your debts.
“Unexpected money is all the money you expected to spend but didn’t make, or the money you didn’t expect to receive but did,” Aliche said.
1. The money you expected to spend but didn’t
Aliche gave the example of buying a $ 50 item, only to find out when you go to the checkout that it’s half the price. Instead of taking a second item and getting two for the price of one, put that extra $ 25 on your debt. That $ 25 is unexpected money you didn’t expect to have.
Or maybe you go out with a friend, and at the end of the meal, they grab the check. That’s $ 30 of unexpected money.
“You meant to spend that $ 30 – $ 30 was lost in your head,” Aliche said. “Really let it go, but put it in your debt. And if you have no debt, put it in your savings.”
This strategy may not seem to make a lot of money. But think of all the times in the past month that a friend treated you or a store held a sale.
It’s easy to forget to put $ 25 here or $ 30 there for your debt, so Aliche recommended having apps ready on your phone. If you have credit card debt, download the credit card app to your phone. As soon as you get in your car after brunch with your friend, go to the app and pay off $ 30 of your credit card debt.
2. Money you didn’t know you would receive
You can also save money that you didn’t expect to get for your debt. Maybe you get an unexpected bonus or raise at work, or money for your birthday or vacation.
“Even your tax refund check could be unexpected money,” Aliche said. “Even if you somehow expect it, it’s money outside of your normal job.”
Aliche does her best to reallocate this money within an hour of getting it.
Bonuses and birthday gifts are likely to be more substantial than the money you save with the discounts. Instead of $ 25 here and $ 30 there, it could be more like $ 100 here and $ 200 there. When you combine these two debt repayment strategies, you could pay off hundreds or even thousands more in a year.
About the Author
Laura Grace Tarpley is a writer at Personal Finance Insider, covering banking journals and guides. She is also a Certified Personal Finance Educator (CEPF). In her five years of personal finance coverage, she has written extensively on ways to save.