4 Key Mindset Changes To Make When Paying Off Debt
When you decide to prioritize paying off debt, it can feel really great and really overwhelming at the same time. The good news is that you can be well on your way to being debt free with a few key changes.
Related Topics
There are many ways to approach the act of paying down your debt— like paying off your smallest debt first or the debt with the highest interest rate. But America Saves has identified four mindset changes you'll need to embrace throughout your debt repayment journey to be successful.
1. No More Borrowing
You may think this would go without saying, but it does need to be said. The first step in getting out of debt is to stop borrowing. Limit your spending to what you have available in cash.
2. Make A Plan
Once you've committed to only spending what you can pay in cash, then it's time to make a plan. This is the time to get a clear view of your finances: your income, your expenses, what you're saving for, and assessing if there are any changes you want to make. Use the America Saves Spending & Savings Tool for a simple way to review your budget.
As you're using the Spending & Savings Plan tool, identify which debts to pay off first, and pay the most you can afford to contribute monthly. Then stick to the plan!
While you're analyzing your finances, ensure that you are practical and realistic about what you can afford to pay each month and that you are paying off your debt with a strategy.
3. Explore Your Repayment Options
You may be able to negotiate a more affordable payment plan with your lenders. Make a phone call to find out your options. For example, student loans might offer an option for income-based repayment or a means to apply for forbearance, which may buy you time before your next payment is due. If you have a large outstanding balance on a utility bill, most gas and electric companies will also work with you and create a payment plan.
One word of caution if you're considering a forbearance agreement for debt: they often come with a nasty price tag at the end of the forbearance period. "Oftentimes, forbearance allows you to delay payment, but then the money is due as a lump sum at the end of that period," Robin Saks Frankel, Forbes Advisor, and Personal Finance Expert, cautions savers.
4. Stick To Cash Purchases When Possible
Once you've paid off your debts, be very selective about when you use credit to make purchases. Large purchases, such as mortgages and auto loans, are fine, but when it comes to credit cards if you can pay it in cash, do so!
Another tip from Tom Quinn, VP of Scores at FICO, is to keep your credit cards open— don't close them once they're paid off. That helps maintain your credit score, but it could be tempting to use your cards. So, stick to cash purchases when possible.
One strategy in making cash more readily available is to take the money that you were paying towards your debts and direct it towards a savings account. This will build you a nice cushion and give you more access to cash in case of emergency, or if there's a fun purchase you want to make— without relying on credit.
Keep it going
Whether you're getting out of debt one loan at a time or paying down your debt to raise your credit score, keep the momentum up. It could seem daunting initially, but when you start small and think big, it all adds up! Every payment gets you closer to your goal of being debt-free.
Want support and accountability while reducing your debt? Take the America Saves Pledge and choose "Debt Repayment" as your savings goal. America Saves will send you tips, resources, and tools to encourage and motivate you along the way.
Check out these related insights!
By America Saves
ATM Card, Debit Card, Credit Card: What’s the Difference?
02.15.2021 By Amelia O’Rourke-Owens
Save On Interest With This Debt Repayment Strategy
02.02.2021 By Guest Blogger
5 Easy Steps to Tackle Your Debt While Saving
Related Tags
CHECK OUT OTHER SAVINGS JOURNEYS FROM SAVERS JUST LIKE YOU
Saving Early: Key to Successful Future
By Johnnie Lovett
For Johnnie Lovett, a Young Illinois Saver, saving has been a habit since he was a teenager. “As a teenager, I was responsible for buying certain things with my allowance,” the Illinois State University junior said.
Budget like Nohemi
By Nohemi
Nohemi found out about America Saves a few years ago as an undergraduate at the University of Illinois at...
Taking Steps Toward Financial Fitness
By Nicky Vasquez
Nicky Vasquez learned about Virginia Saves when she attended her first class with Bank On Virginia Beach....
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “w...
The Gift of Homeownership
By Quaneka Willis
Quaneka Willis, a single mother of three children, was receiving rental assistance through the Housing Au...
Savings #ImSavingForSweepstakes
#ImSavingFor Winner Story
By Pedram R.
America Saves awarded one lucky saver, Pedram R. from California, $750 for sharing his #ImSavingFor story. Pedram said, “Saving is important to me because it proves I am not willing to buy unnecessary things to please others or to be perceived as successful.”
Budget like Nohemi
By Nohemi
Nohemi found out about America Saves a few years ago as an undergraduate at the University of Illinois at...
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “w...
Developing a Savings "Game Plan"
By Eunice Diaz
Eunice Diaz, a teacher in Colorado Springs, had been noticing a pattern. Despite the fact that she and he...
Saving for a Bright Future
By Kristin Hendricks
Kristin Hendricks, a single mother from Texas, understands the importance of saving money and following a...
A Think Like A Saver Attitude
By Melissa
Melissa has always been thrifty with a #ThinkLikeASaver attitude. This served her family well when her husband lost his job in 2014. Using their savings, Melissa’s family stayed afloat while her husband found a new job.
Put 20 Percent Away
By Melissa
“I am a single mother, and I make ends meet for me and my daughter, but I wanted to put money away for my daughter for a college fund. So I started saving 20 percent of my paycheck every month to put it away in a savings account with a high Annual Percentage Yield (APY). By the time my daughter is 18, I will have saved nearly $90,000.”
Jump-Starting a Financial Makeover
By Nichelle Johnson
Nichelle Johnson, a single mom with two teenage children, knows what it’s like to stretch a dollar. When ...
A Think Like A Saver Attitude
By Melissa
Melissa has always been thrifty with a #ThinkLikeASaver attitude. This served her family well when her hu...
Saving is a Family Affair
By Jeff
Saving is truly a family affair for Jeff’s household. During America Saves Week 2019, he pledged to save ...
Don’t Laugh at Saving Spare Change
By Brittany
Virginia Saves saver, Brittany, decided to start saving again when she became a single mother. She thinks...
Budget like Nohemi
By Nohemi
Nohemi found out about America Saves a few years ago as an undergraduate at the University of Illinois at Chicago. She remembers attending a University of Illinois Saves event where she decorated a piggy bank and took the Pledge, but college life made her put the thought of saving at the back of her mind.
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “w...
Starting and Continuing a Personal Finance Journey
By Kiara Hardin
When Kiara Hardin, now a junior at Western Illinois University, became an intern with the Chicago Summer ...
Put 20 Percent Away
By Melissa
“I am a single mother, and I make ends meet for me and my daughter, but I wanted to put money away for my...
Saving is a Family Affair
By Jeff
Saving is truly a family affair for Jeff’s household. During America Saves Week 2019, he pledged to save ...
Taking Back Control Over Finances
By Nadine Bialo
After becoming a Virginia Saver and getting help from BankOn classes and coaching, Nadine Bialo took back control over her financial affairs.
From Overwhelmed to In Control
By Debi
In 2017 Debi felt overwhelmed. Her credit cards were maxed, and she wasn't exactly sure how to handle it....
Developing a Savings "Game Plan"
By Eunice Diaz
Eunice Diaz, a teacher in Colorado Springs, had been noticing a pattern. Despite the fact that she and he...
Inspired to Build Savings By Starting Small
By Sharon
With little-to-no money in the bank and living on a limited income with her adult daughter, Sharon wasn’t...
Getting Out of Debt
By Tonya Shelton
In 2004, Tonya Shelton was facing financial ruin. Barely making more than minimum wage and having lost he...
Savings #ImSavingForSweepstakes
#ImSavingFor Winner Story
By Pedram R.
America Saves awarded one lucky saver, Pedram R. from California, $750 for sharing his #ImSavingFor story. Pedram said, “Saving is important to me because it proves I am not willing to buy unnecessary things to please others or to be perceived as successful.”
Saving is a Family Affair
By Jeff
Saving is truly a family affair for Jeff’s household. During America Saves Week 2019, he pledged to save for retirement. But making a commitment and creating a plan to save isn’t a new concept for him.
Getting Out of Debt
By Tonya Shelton
In 2004, Tonya Shelton was facing financial ruin. Barely making more than minimum wage and having lost her home to an unexpected family crisis, Shelton and her family were forced to live in a rundown hotel.
If we feature you in our newsletter, you get $50.
You May Also Be Interested In...
Take the America saves pledge
Make a pledge to yourself and create a simple savings plan that works. Complete the Pledge and America Saves will send you short email and text reminders, resources and tips to keep you on track towards your savings goal. Become part of an entire community of savers. Get started now!
creative ways to fund your savings
Those with a savings plan are twice as likely to save successfully. Taking the America Saves Pledge is a pledge to yourself to start a savings journey and America Saves is here to encourage you along the way. Take the first step toward creating a better financial future. Make a plan, set a goal, and pledge to yourself to start saving, today.
Congrats on completing the pledge!
Congrats on completing the pledge!
We are so glad you have started your savings journey and Military Saves will be right beside you the whole way! You will soon receive an email from the Military Saves team to help encourage you. Find helpful links below to continue researching topics on saving.
Take the America Saves Pledge
Make a pledge to yourself and create a simple savings plan that works.