First some legal jargon:
This blog is not intended to provide professional financial advice. You should consult a certified financial professional to support you in your individual needs. The purpose of this blog represents my own experience, and should not be used as professional financial advice.
Also, this blog does contain affiliate links which directly benefits Shaping Development.
Now on to our blog…
So, you made your budget and you cut your spending, and you’ve cut your spending down to the bare minimum, but you still do not have enough at the end of the month to make a significant dent in your debt. At this stage, you have two choices:
1) Continue at the rate you are going
By paying more when you do have extra money leftover at the end of the month, you won’t significantly reduce your debt at a fast pace, but it will help you pay off the remaining debt eventually. Most loans have a 10-30 year amortization schedule (a fancy way of saying how your interest and principal are applied from your payments each month—there are other parts of this, but as the borrower this is what you need to know)…so at the longest if you continue to pay off the minimum payment, in 10-30 years you will be finished paying off that debt. The tricky thing with this plan is that credit card debt may never be paid off because over time interest rates can change, and if you continue to spend, it will continue to add to the balance (this is why I recommend to lock them them away and give someone trusted like your partner or parent the password).
2) Increase your income
If you are not satisfied with continuing the rate you are going, you are going to need to find a way to increase your income. This is something that in a pandemic is extremely hard to do, but pandemics aside, if these were typical times, the way to do this is two-fold: a) negotiate a raise, or b) diversify your income stream. Regardless, pandemic or no pandemic, you can still work towards diversifying your income stream.
If you have been with your company for a long period of time without a significant increase in pay, and your performance has been good, you should attempt to negotiate a raise with your organization. Here are some tips for doing this. Again, a pandemic may not be the best time to do this, but if your company has been relatively pandemic-proof, you may be able to do this successfully.
If you are not able to negotiate a raise with your job at this time, it is time to seriously consider diversifying your income stream. What does this mean? Well…two of the things in life that are the most valuable are money and time. If you don’t have extra money to pay down the debt to reach your financial goals, you will need to trade your time for more money. One of the things I’ve found in working multiple jobs at the same time over the years is that by diversifying my income stream, I’ve also created job security for myself, rather than relying on solely one organization to provide my entire income. As we have seen especially this past year, your job could close tomorrow and you would be out of work completely, but with a diversified income stream it can take some of that stress off.
Here are some ideas for diversifying your income stream:
1) Look for a part-time or a few part-time jobs. Can you work at a home improvement store, grocery store, family business, grocery delivery, restaurant/takeout delivery, or ecommerce shipping company on nights and weekends to bring in some extra cash to pay down the debt?
2) Look for things that you can sell. Have your kids outgrown their toys? Do you have things around the house that you never use? Do you have clothes that are in relatively good condition that you can sell? Your local town will most likely have a “virtual yard sale” Facebook page that you can use to re-sell some of these items each month. With those sales each month, you can chip away more at the debt balances.
3) Look for coupon and cash back services. This is one of the ways I try to reduce my spending each month and take advantage of extra cash back. Use their browser extensions or apps to make it easy…anytime you need to purchase something the browser extension will alert you to a cash back deal, or purchase items through clicking through their apps so you maximize your cash back reward.
Some of the services I use are:
Ibotta: upload your receipts and it sends you a check each month based off of the cash back deals for that month. There are also coupon codes to save you money!
Rakuten: sends a percentage of cash back on things you need to buy each month.
With those checks received each month, put them directly towards your debt payoff plan.
4) Start a new business (this is again where you will need professional advice from a CPA and small business attorney). Do you have a passion project that you’ve always wanted to explore? Research strategies to start a business on a limited to zero budget and get creative! Explore that passion and start making money doing it! If you need support with this, we’ve developed a virtual business incubator to connect you with new side hustle business owners like yourself, and to teach you all the steps to make that dream a reality!
So, once you pay down your debt, then what? Once the debt is gone, you have now also built systems for saving! Stay tuned for next week where I will share strategies I’ve used for boosting my own savings/retirement savings to gain financial flexibility!