The Payoff Plan: How I’m Paying Off My Debts

They say there’s nothing sure in life except debt and taxes. (That’s the saying, right?) I shared previously how my bouts with unemployment ran me into the ground emotionally and mentally. A fun side effect was the pile of debt I incurred. Defeat was not an option. And so I arose to the occasion with my Payoff Plan.

Here are a few of the ways I manage my money and pay my bills.

(I feel compelled to clarify that I share this for anecdotal purposes. To show what works for me, in an attempt to encourage and inspire others, whether or not they use these tips. This is not financial advice; it’s merely part of my journey.)

• A Budget App – I made a whole blog post about my budget app–that’s how imperative it has been to my payoff plan. The great thing about any budget app is that it keeps you honest. Let’s be real here: humans inherently suck at math. And not just math, but we suck at accurately and realistically keeping track of our spending. It’s easy to let it get away from you. I for one, didn’t realize how much I was eating out, or just how much my groceries could add up from careless spending. Simply having a tracker keeps me honest, which helps me be more mindful of spending, which…helps me save money.

• Small Payments Really Do Add Up – The number one feeling I had upon calculating all my monthly expenses against my income was dread. I felt like I could never pay off my credit card and medical bills. It seemed too overwhelming. But I did the long-term math and kept reminding myself that a small set payment each month would be infinitely better than nothing at all. I mean, it’s just pure fact–paying $20 is better than $0 a month. It makes such obvious sense it’s not worth saying. But to me, the down and out, it was worth saying multiple times.

  -So here’s what I do each paycheck with medical bills: On payday, or very near to it, I calculate how much I can spend on debt. As soon as possible, I pay on the oldest bill I have, even if it’s a modest payment. I pay as soon as possible so that I don’t spend that money. If I still have room in the budget, toward the end of that check period, I pay down on some other bills.

  -Same with credit card bill/car note. If I have a little extra in the budget, whether it’s $5 or $20, I can add it to the minimum balance of either my credit card or car note. This is an alternative option to paying another medical bill or putting the money in savings.

• Discounts and Payment Plans – I was thrilled to find I could get a discount by paying some of my bills in full. I was even more thrilled to have the money to do so. That’s not always the case because not everyone will give you a discount, and I won’t always have the sum of money to do it. But having a few small, manageable balances go to collections worked in my favor because these few did give me a discount. For one of my credit cards, I was able to set up a fixed-interest, all-fees-waived payment plan by signing up for automatic payments. I did it all online, too! Just because I saw a link and filled out a questionnaire about difficulty making payments.

• Savings Account – It took me awhile to get on board with this. I thought to myself, “If I even have any extra, I’ll just pay more toward the stupid bills!” Ah, I should have learned by now not to trust my judgment. Because if I give myself any leeway, I will take advantage of it. I’m sneaky like that. So, instead, I do a general budget run (I pretend I’m an accountant and “crunch the numbers”), and find out about how much I’ll have for everything. When I get paid, I immediately put a set amount in savings, that way I can’t spend it. The rest goes to actual bills. Sounds really obvious, but again, I need to do it this way, otherwise I will talk myself into spending it before I can save it for one big debt payoff or expensive item that I need.