4 Tips To Pay Off Debt Faster

Do you want to know how to pay off debt faster? Are you in personal or business debt and want to know the best ways to destroy that debt? You’ve come to the right place. Try out these 4 Tips for Paying Off Debt Faster.

These are proven strategies that we have implemented with clients and gotten real results.

Case Study: One of our clients had 3 loans she’d been trying to pay off for years, and with these strategies, she paid them all off within 1 year! Watch her testimonial about her experience here.

1. AVOID GETTING INTO DEBT

The best way to pay off debt is to never get into it in the first place! Going into debt should be a last resort in both your business and your personal life, and should only be done after much consideration and research. As Mike Michalowicz (author of Profit First) has said, “if you can’t pay your bills, you can’t afford your bills!” Don’t take out loans just because you can. It’s time to tap into the old entrepreneurial mindset and find innovative ways to do business!

2. USE THE BOXING METHOD 

Pay the minimum balances due out of your operating account every month, treating them like regular bills. If you have extra money in your operating account each month, use it to pay off more! Each quarter, if you receive a Profit payout (see #5), take 95% of that payout and slam it into your debts! It’s called the boxing method because you give small punches to the loans on a regular basis (minimum payments), and then hit the debt with a massive uppercut (quarterly payments). Continue with this routine until all your debt is destroyed.

3. LEVERAGING YOUR HUMAN BEHAVIOR: PAYING OFF YOUR SMALLEST DEBTS FIRST

 While logic dictates you should pay your highest interest rate debt first, we as Profit First Professionals teach you to leverage your human behavior-we celebrate “early successes”. When we see early progress in our management of money, we become more committed to the processes that got us those successes, even if the progress is small. In regards to debt, that means paying off your smallest debt first, while continuing to pay the minimum balance due on all the others.

Once the smallest debt is paid off, you should target the next smallest and add the amount you were paying to the first debt onto the second. This creates a snowball effect that will wipe out your debts more effectively and make you feel better about it in the process.

This is not a new concept-Dave Ramsey and Mike Michalowicz have both supported this strategy, and thousands of business owners as well as millions of people have used it effectively.

4. MAXIMIZING YOUR CASH FLOW SYSTEM 

Knowing where your money is going is a vital first step for any success in a business. If you know where you are spending your money, you can identify where you can make cuts. We teach the Profit First system, in which you allocate your incoming revenue into separate accounts (things like Profit, Tax, Owner’s Comp, etc.) and the remainder leftover is what you can spend on operating expenses. This way you don’t have all your money in one pot, waiting to all be spent.

It also forces you to cut down on unnecessary expenses, and still save money for profit (which will come in handy every quarter for your uppercut payment on your debt from #2). Once you’ve cut down on expenses, you can free up more money to pay off your debts faster (paying more in minimum payments from #2).

Implementing an effective cash flow system like Profit First that plans for things like Profit and Debt will change your business and reduce the stress of owning and operating your company.

We are certified Profit First Professionals, masters at helping you implement such a system. Contact us to get started on increasing profits and destroying your debt!

 Download PDF Worksheet here.