How to be Debt-Free in a Year – Really!
Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.
I graduated from college with a considerable amount of debt. (At least, it seemed like a lot to me then.) Shortly after I graduated, though, my husband and I set a goal to eliminate all debt. (I had the student loan debt, and he had the credit card debt). We knew it was impeding our ability to gain wealth and accomplish life ambitions.
We accomplished our debt payoff goal. It took us about a year to pay off my student loan, which, looking back, was an impressive timeframe based on our income and the amount we owed.
But how do you make yourself debt-free in a year? I can tell you that the formula is simple. Just pay extra on your loans, and they will go away. But there is more to it than that. It is simple but also difficult.
Regardless of where your debt came from — credit card debt, student loans, or mortgages — I have some tips and tricks to make the process easier. Just make sure you understand that it will change your life anytime you decide to accomplish financial goals like eliminating your debt. In the short term, it will likely make your life more difficult. But just like working hard to start a business or exercising to improve health, the long-term benefits are endless.
Jump To
Tips for eliminating debt
There are a few different approaches that can help you eliminate debt faster. These methods are all effective, and some can be used simultaneously. Using more than one strategy at a time will speed up your debt elimination plan.
Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt
- Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
- TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
- Subject to qualification and approval. $1,500 monthly income required.
- Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.
Debt snowball vs. debt avalanche
The debt snowball and debt avalanche methods have been shown to work because of their focus on wins. They are both effective ways of tackling your debt.
The debt snowball method targets one debt at a time, starting with the smallest debt. You ignore the interest rate or type of debt and instead focus solely on the dollar amounts of each debt. Starting with the smallest debt, you put all your extra money toward only that debt (while continuing your minimum payments on your other debts). Eliminating the smallest debt as quickly as possible will excite you — one of your loans will be completely gone!
You then take all the money that was being put toward that debt and put it toward the next smallest debt. Say, for example, you were paying $600 per month toward your smallest debt plus an extra $400 to help pay it off faster, totaling $1,000. You would then take that $1,000 and put it toward the next smallest debt, adding it to the minimum payment. As debts are paid off, the money you put toward each one increases, creating a debt snowball.
The debt avalanche method uses a very similar process. But instead of focusing on the dollar amount of each debt, you focus on the interest rate. When you lay out all your debts, organize them by interest rate and start by first paying off the debt with the highest interest rate. This will also give you the satisfaction of wins, but they may not be as fast as with the debt snowball method.
An advantage of the avalanche method is that you will save money by paying less in interest over time. You will eventually be left with only low-interest loans as you eliminate high-interest loans.
Debt consolidation
Consolidating your debt, or turning multiple loans into one loan, can simplify the debt elimination process (possibly even speed it up). If you have many loans with different companies, making your monthly payments can become confusing and tedious. And making extra payments on multiple loans can become frustrating and deter you from following through on your plans to eliminate your debt. A debt consolidation loan may solve these problems and simplify your loan repayment.
In addition, if you have several high-interest rate loans, debt consolidation could be beneficial. You may be able to consolidate these high-interest loans into a single loan that has a lower interest rate. This will simplify your repayments and save you money because of the lower interest rate.
Related: How to Consolidate Debt
Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt
- Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
- TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
- Subject to qualification and approval. $1,500 monthly income required.
- Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.
Home equity line of credit
If you own a home, you have a tool at your fingertips that will benefit your debt elimination plan. The home equity line of credit (HELOC) is a loan that uses your home’s equity as collateral. This allows it to have a very low-interest rate, similar to mortgage interest rates.
You could take a HELOC loan and use it to pay off credit card balances or a personal loan or car loan with a high interest rate. It does not change your debt amount because it is simply a balance transfer, but it does move the loan to a lower interest rate. This will help you with debt management by slowing down your debt growth and giving you time to create a debt repayment plan.
Another option you have with your mortgage is to refinance. Refinancing could save you some money if your mortgage rate is higher than the current interest rates. Make sure to factor in closing costs, though.
Increase income/decrease costs
The most basic part of eliminating debt is using a personal finance budget to stop overspending. If your costs still exceed your income, causing you to go further into debt, trying to get out of debt will be useless.
Budgeting, or deciding how much money will be spent before it is spent, will help you determine how much extra cash you can put toward your debt payments. And if the amount isn’t enough to reach your goals quickly, you have two ways to solve this problem.
First, cut spending. Find the areas of your spending you can do without for a short period of time — or indefinitely. Maybe eat out less often, cut down on travel, or stop buying clothes. Or you could make more difficult choices. Sell your car that you are making payments on and buy an older vehicle with cash. Move out of your home that you have a mortgage on and start renting. However, you do it, cutting costs will speed up your plan to eliminate debt.
Second, increase income. (Before you do this, be sure you have a budget and have agreed that all extra income will go toward debt.) There are infinite ways of increasing income, and how you do it will be up to you. But some common methods are to work overtime at your current job, find a second job, start a side hustle (small business or contract work), or sell off any items you own that have value.
Note: Before you put extra money toward your loans, you should save at least three months' worth of expenses and put it into a savings account as an emergency fund. This money should not be touched unless a serious crisis occurs. But it is a way to prevent you from going further into debt when an emergency happens.
Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt
- Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
- TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
- Subject to qualification and approval. $1,500 monthly income required.
- Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.
Companies that can help with getting out of debt
Financial Peace University
Dave Ramsey didn’t make up the debt snowball method, but he did popularize it. And his financial management classes taught through Financial Peace University, have helped millions eliminate debt and live a financially comfortable life using a simple program of controlling spending and attacking debt. This course also includes their budgeting software called EveryDollar.
Pros:
- Focuses on eliminating debt.
- Gives you an in-person or virtual class, including budgeting, investing, and credit counseling.
- Includes EveryDollar budgeting software in addition to the class.
Cons:
- Higher cost than alternatives.
- Requires more of your time.
- Only uses the snowball method for eliminating debt.
Personal Capital
This free app and web-based financial management program focus on building wealth through investments while monitoring spending categories. Using their software, you can track your net worth and budget, analyze fees, and more.
Pros:
- Excellent user interface on the app.
- Focused on growing net worth.
- Free software.
Cons:
- Requires net worth of $100,000.
- You will receive occasional calls from a Personal Capital financial advisor.
- Some connectivity issues (depending on your account holders).
Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt
- Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
- TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
- Subject to qualification and approval. $1,500 monthly income required.
- Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.
Quicken
Quicken has been around longer than most competitors and has an established product. It is a paid software downloaded to your computer that links with your financial accounts. Some of its advantages are its customizability and its tax planning abilities.
Pros:
- More accounting and finance abilities than app-based alternatives
- Fewer connectivity issues than most alternatives
- Allows multiple budgets
Cons:
- Paid software.
- Not app-based.
- More expensive than Mint.
Costs
Debt Assistance App | Costs | Tools |
Financial Peace University | $79.99 | Comes with EveryDollar budgeting software |
Personal Capital | Free ($100,000 net worth minimum) | Monitors net worth |
Quicken | $5.99 per month | Syncs to DIY tax software |
The bottom line
I used the snowball method when paying off my debt, which worked well for me. But that wasn’t the only thing I did. I also tried to live as frugally as possible, paid attention to where every dollar went, found ways to increase my income, and more.
To succeed at paying off your debt in a year, you must use as many tools as possible and work as hard as possible. Doing this will change your life. It will make your life more difficult for a short period of time, but in the long run, your benefits will be immeasurable.
Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.
Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.
Images appearing across JoyWallet are courtesy of shutterstock.com.
Writer
A veteran wordsmith and research nerd, Brittany Wren spent a decade working in higher education where she helped people overcome challenges to chart a path forward. These days, she writes about personal finance, careers, parenting and education. Her content has been published by a wide variety of brands including T-Mobile, Intuit, LifeLock, Reliant Fund Administration and CURO Financial Technologies Corp.
Share this article
