You told yourself this was going to be the year you paid off debt. Maybe you have made some progress, maybe you have not, or maybe the debt you paid off earlier this year has quietly started creeping back up. If you are sitting in July wondering why nothing has really changed yet, this episode is for you.
Here is what I want you to understand before we talk about any numbers. Paying off debt quickly is not the same thing as paying off debt for good. When you take a lump sum of money and wipe out a balance overnight, the number on your statement changes but nothing about how you think about or manage money actually changes. And if nothing changes, your debt comes back, sometimes faster than it left. That is not a willpower problem. It is a foundation problem, and that foundation is what this episode is about.
I am walking you through exactly how to pay off $5,000 of debt before the end of the year using three strategies, but before any of that can happen I want to make sure you have the two things in place that every past debt payoff attempt was probably missing. Because $210 a week applied to debt with no plan underneath it is how you end up right back where you started by February.
In this episode you’ll learn…
[00:04:20] Why paying off debt quickly almost always leads to getting right back into debt, and what has to change underneath the number before any payoff strategy is actually going to work for you
[00:08:45] The two things you need to have in place before you put a single extra dollar toward your debt, including why saving for the expenses you would normally put on your credit card is the step most people skip and exactly why skipping it keeps you stuck
[00:13:30] The math of paying off $5,000 before December broken down three different ways, $840 a month, $420 every two weeks, or $210 a week, and why seeing the number from different angles makes it feel more accessible
[00:17:10] How to redirect money you are already spending to find your $210 a week without feeling like you are cutting everything you love out of your life, including specific examples from groceries, house cleaning, subscriptions, and DoorDash
[00:21:45] How to use extra income like bonuses, refunds, mileage reimbursements, and overtime strategically so that extra money actually accelerates your debt payoff instead of disappearing before it gets there
[00:26:15] How to increase your income to hit your debt payoff goal faster, including real examples from clients who monetized skills on TaskRabbit, Rover, and social media to create an extra $800 to $1,500 a month
Tune in to this episode of Money Files to learn the three strategies that will help you pay off $5,000 of debt before the end of the year so you can close out December with real momentum instead of the same balance you started with.
Are you ready to start asking for help with your finances? Apply to work with me, and let’s start working towards your financial goals.
If you loved this episode on paying off debt, check out Episode 206 The Safety Net User: How to Break the Cycle of Returning Debt.
Transcript for “How to Pay Off $5,000 of Debt Before December Using Money You Already Have“
Intro: Hi, and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work everyday with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Keina: Hello, and welcome back to another episode of Money Files. If you haven’t done this already, would you please go and leave a review wherever you enjoy listening to my podcast, whether it is on Apple or Spotify, but your reviews help other people find my podcast. And so my goal as a financial coach is to help people have less shame around money. Like I need money just to be the thing that we talk about and for money not to be this taboo thing that we’re all just looking at everybody else and hoping that we’re all figuring this out. So at the time of this podcast, it is July and we are halfway through the year, which is crazy to me.
I feel like the older I get, the faster the year goes, which anyways, when you’re little, like summer was so long, it was amazing. And summer is still amazing, but man, with all the things on our calendar, time just seems to be so fast, so quick. And I want to talk to you about your debt payoff goals. I’m sure this year you told yourself like, I’m going to pay off some debt and maybe you have paid off some debt, maybe you haven’t, or maybe you have paid off debt, but then the debt seems to be popping up again, or maybe you were just one of my friends that like your head is in the sand and you’re like, la, la, la, la, la, hoping everything kind of just settles. And I want to let you know friend that things aren’t going to settle.
You are going to have to make some changes. I want to help you make some changes that you feel are sustainable. I want to help you make changes that help you pay off debt and not get back into debt. For my clients, when we are working on debt payoff, I want to make sure that we have those things. I want to make sure that things feel sustainable. I want to make sure that we are actually addressing the reasons that we’ve gotten into debt. If you’ve heard any of my other podcasts on debt, it’s not just enough to pay off the debt. I am not really a big fan of, I’m going to take a lump sum of money and pay off my debt because generally the quicker you pay off your debt, the quicker you get back into debt.
And what I mean by that is that if I was gifted $20,000 today and I had a $20,000 credit card, go and pay my credit card off, right? It happened in an instant. I paid it off in less than 24 hours. More often than not, your debt is also going to come back in 24 hours and not necessarily the $20,000. But what happens is that you don’t actually know the reason that you’re in debt. You just go and you have this like knee jerk response to like, oh, I need to get out of debt really quick. And this is going to help me get out of debt, but you don’t actually build the foundation for getting out of debt. And if you don’t have the foundation for getting out of debt, nothing actually changes. Like the number on the statement changes, but nothing about how you manage money, nothing about how you think about money has actually changed. So if none of those things are changed, then your circumstance isn’t going to change. I know, it’s very, very sad.
So when I am talking to clients about paying off debt, they’re sometimes so, so eager to want to pay it off. And I’m like, hey, just give the process some time. Yes, maybe we’re going to have another month of interest and that interest is $300, but I want that $300 to be an investment in your future to pay off the debt once and for all, not for you to get right back into debt. I’m not worried about the interest if we’re actually fixing the underlying problem. So that’s how I think about that. It’s also why people come to me and they’re like, Keina, I’m in debt. Does it make sense to go into more debt to work with you? Yes, it does. Because we’re going to be changing the behaviors that got you into debt.
We are going to be giving you accountability. My clients love to say that they feel like I go into their brains and I like tinker around and just change the way they think. And that’s what we have to do. We have to change the behaviors. And the reason I know this is true, and you can even look in your own life and see why this is true, is think about how many times you’ve paid off your debt. It’s happened more than once. You don’t have to raise your hand. You don’t need to email me because I already know. And even in my own debt story, which I told you last week is paying off debt. You’re waiting for the appropriate time of the year, whether it’s a bonus, whether it is from your tax refund. And so that’s kind of like the reprieve that you look for.
But if you haven’t actually fixed anything, you’re going to continue to see the same balance pop back up. Could be the same amount. It could be more. It’s the reason you’ve tried personal loans to pay off the debt, and then the debt is back. So I say all of that to say that you probably have gone into this year saying, hey, I wanted to pay off debt. And you feel like there has been no movement. I, in this podcast, want to help you pay off $5,000 by the end of the year with your debt. But before any of that can happen, I want you to know what is my budget. If you are still operating by a list of bills then this podcast is not for you, you need to make sure that you make an actual budget.
I’m not going to go into budgeting in this podcast episode. You can tune into some of my other podcasts. I can put something in the show notes. I will attach both my spending plan and I will also attach some of my podcast about eliminating fake math and actually making a true budget because your list of bills is not a budget. You want to follow my three-money bucket system and that is going to help you actually have a budget. So let’s say that you already have your budget, and that’s the first step also in my five-step framework is that you have to have a budget. It’s the reason that your past attempts at paying down debt haven’t actually worked.
So the next thing I want you to do before we even get into paying off the debt, so first you need to have a budget. Secondly, the thing I want you to do is I want you to know what do I need to plan for that would go on my credit card? See, we haven’t even gotten to debt payoff yet. That’s how I know you’re going too quick. I want you to think about what is happening in between now and the end of the year that I would put on my credit card and figure out later. This is also going to require your true honesty, but what would I put on my credit card in between now and the end of the year and that I would tell myself I’m just going to figure it out later? And if you’re telling me, Keina, there’s nothing, I know that’s not true.
That’s just an automatic money bot coming to serve you that is actually not serving you. I want you to truly sit and think about, okay, we’re in July, what’s happening in August? What’s happening in September? What’s happening in October? What’s happening in November? What’s happening in December? Take a mental note of your calendar, open up your phone, scroll through the calendar. Things that generally come up for my clients are trips, holidays, birthdays, back to school fees, even as we get into October, like seasonal activities. If you are someone who’s like, oh, we’re going to go apple picking and we’re going to go to the wineries, like thinking about how you like to spend time outside. Those things need to go into your budget.
So I want you to essentially be planning for them. I’m also going to use the word save for those things because your holidays isn’t necessarily here in front of you. So you think that you’re just going to prepare for it with your November check. You can’t prepare for all of your holiday expenses with just your November check. That’s the problem and why it stays on your credit card. So I want you to think about how do I incorporate the expenses that I know are going to be coming up into my budget? So you need to make sure that you have a budget and then number two, you need to make sure that you’re actually saving for the things that would normally be put on a credit card and you want to think about what are those things and just list those out. Because that is going to shape your ability to be able to pay off debt and stay out of debt.
And right now, if you’re thinking like, Keina, this is so much work. I don’t know how to do all of this. One, you can apply to work with me and we can do it together. But also two, prop back to your brain. Is this actually a lot of work? What happens when you actually sit through this and you are able to think about the expenses that are coming up and you are going to feel prepared for them, how good is that going to feel. You’re going to feel confident. You’re going to be really proud of yourself. So take the moment right now to feel confident. Take the moment right now to feel proud and talk back to that overwhelm that might be creeping up inside of you in this moment because this is the work.
It’s work that you are actually capable of doing even if it feels uncomfortable. Because really, if we’re being honest, that’s the truth, is that you just feel uncomfortable and it may feel like something you haven’t done before but there are so many things that you haven’t done before that you are now doing. And those things are outside of your finances even. So you can do this. I believe in you and let’s keep going. So you have your budget. You are saving for the things that you would normally put on your credit card.
And now I want to talk to you about paying off $5,000 before the end of the year. So the math of this, which is what I want to get into first is that this is about $840 a month. So $840 over the next six months is what will get you to paying off $5,000 on your credit card or whatever debt you choose. I want to break that down even more. That means that’s about $420 every two weeks or $210 a week. So I’m giving you three different numbers that you can use. I find it helpful to think about numbers in different ways because they create different levels of accessibility for my brain. So it’s either $840 a month, which maybe your brain is like, oh my goodness, Keina, that is so much money.
So $840 a month, or we can think about it $420 every two weeks, or we can also think about it as $210 a week. So I think that thinking about it as $210 a week makes it really accessible because there are so many things that you are probably already doing that cost you $200 a week. And you’re not thinking about it in that way because you’re just thinking about these are things that I like to spend money on. So we are going to look at paying off this $5,000 in credit card debt by doing one of three things. The first thing that you can do is you can redirect money. So when I’m talking about redirecting money, if we’re looking at $210 a week, how can I redirect $210 in my week? And some little moves that you could make is maybe you’re going to shift how much you’re spending on groceries.
Could you spend $100 less on groceries a week? So if you spend $100 less on groceries a week, that’s $400 a month that you could be putting towards your credit card. That could be something that is easy and accessible for you. Maybe you are someone who gets your house cleaned every single week. And instead of getting it cleaned every single week, maybe you’re going to go down to getting your house cleaned twice a month. So if you get your house cleaned every single week, and let’s just say, for sake of math, that it costs $100 a week to get your house cleaned or $400 a month, and let’s say you decide to do it every other week. Well, now you’re going to free up $200 a month to get it done every other week versus getting it done every week.
Also know, yes, I’m using very clean numbers. I know if you’re listening, you’re like, It costs more for the bi-weekly versus the weekly, but you do the math in your own time, but that is an idea for how to get to this $210 a week. If you are someone who loves manicures and pedicures, maybe you get that done every single week, or maybe you get it done every other week. But what if you got it done once a month? What if you reduce the number of manicures and pedicures that you got? And I want to be really, really clear with you because in case you are thinking about like, oh my goodness, this is exactly why I don’t want to budget, why I don’t like doing this because I’m going to have to be restricted. I need you to change your language around this.
What we’re actually doing is realigning how you spend money so that you can be in alignment with your goals. So we are realigning your resources so they’re in alignment with your goals. That’s all we’re doing. And so this realignment may feel uncomfortable at first, but if we can redirect funds to get $5,000 paid off your credit card, how are you going to feel in six months when your credit card balance has gone down by $5,000? So is that feeling worth it for you to realign your resources? I would say yes, especially like, we’re not talking about cutting things out completely, but there are things that we can think about differently so then that way your finances feel better and you have a different experience. Maybe you’re going to pause your Peloton subscription.
You realize like, oh, I have Peloton, but I’m not really using it. And that’s almost $60 going out a month. That’s $15 a week. Once again, not something that you’re necessarily thinking about because maybe it doesn’t feel like that much money to you, but it is money going out. We want to look at where do you already have money going out that we can realign. Maybe there are expenses that you can pause. Maybe there are expenses that you can revisit. Maybe there are expenses that you can cancel. But if you can go through how you’re already spending money, we could find $210 a week for you to be able to apply towards your debt. So that’s the first thing is that we can redirect funds.
One of the other things I was going to say under this category is maybe you’re going to make a commitment for the rest of the year to cook at home. You’re going to limit your DoorDash to twice a month. There are some of my clients that have literally spent $800 a month in DoorDash. I’m not guilt-ing any of my clients for spending $800 a month. But if you realize, dang, I’m spending that much money and I didn’t know it, I don’t want you to have that experience because that’s money that you could be putting towards debt. It’s money that you could be putting towards some other financial goal. So that’s why we want to look at redirecting funds. So that’s number one.
Strategy number two for paying off $5,000 of debt by the end of the year is, I want you to prioritize extra income or extra funds that you’re getting. I’m going to go back to the beginning of the episode. This is not where you’re starting. You’re starting with, let me make sure I have a budget, make sure I’m thinking about what is going on my credit card. You have to have that baseline because some of you have already tried to prioritize extra funds and you may have even stopped doing this because you’re like, why does it matter? So if you have a bonus, if you have a refund, maybe you get paid for mileage at work or maybe you get time and a half because of working certain days, you are getting extra funds, above and beyond your normal paycheck.
So I want you to think about how can I use these extra funds to put $840 a month towards my debt? Maybe you can even put 2,000 or 3,000 or 4,000, but how can I use these extra funds to help accelerate my debt payoff before the end of the year? Make sure that as you’re thinking about these extra funds, I also want you to be thinking about do any of these extra funds need to cover anything that would normally go on my credit card? Because you could get a $10,000 bonus, which really is going to be like $5,000 by the time it comes to you. And if you take that $5,000 and put it all on your credit card, but then you forgot that your $500 hair appointment where you get highlights, color and everything that you forgot about that because you didn’t plan for it, then that $500 is going to go in your credit card and you’re going to feel defeated. So that’s why I’m telling you to go back to what is normally going to go on my credit card and what do I need to plan for?
So if that was the example with the hair and you had that $5,000 bonus, I might just say, okay, you know what? I am going to take 3,000 of it, put it on my credit card, but I know I have like $2,000 worth of expenses coming up. I’m going to put that into a savings account so I can take from it when I need to pay the bills that I have. Like that is how I want to think about this strategically and it’s going to keep and give you momentum.
And then the last thing for paying off $5,000 of credit card debt by the end of the year is that I would offer that you can increase your income. Maybe you’ve also tried this before and you’re like, Keina, I’ve increased my income before and it doesn’t make an impact. You might be right. It’s also not making an impact because you don’t have a plan. That’s why we got to go back to the budgeting and we got to save for the things that would normally go on our credit card. But if you can make extra income, which some of my clients, this is a strategy that we use, you can make an extra $840 a month. That could be your goal. You could make an extra $210 a week. That could be your goal. You can make an extra $420 every two weeks. That could be your goal.
And that money could go directly to your credit card debt. So you could do that by getting a part-time job. You could monetize a skill that you have. With my client, Courtney, she is, gosh, I can’t remember how long ago I interviewed her, but with my client, Courtney, we monetized like a social media skill that she had. And so she was able to create $1,500 per client that she signed. And so she could use that extra income to pay off credit card debt. I have clients right now that are doing things like Rover. They’re doing things like TaskRabbit because they, one, either enjoy animals, or two, they have a skill, like a handyman skill, and they’ve been creating extra income to help accelerate their debt. Or this is a great place too.
If you have a role where you can do overtime, thinking strategically about how you want to create extra money, and not just doing overtime for the sake of doing overtime, but your overtime attached to the goal of creating an extra $1,000 a month or $2,000 a month, and in addition to having your budget will actually help you pay down that debt quicker. So just to recap, in order to pay down $5,000 of debt by the end of the year, you need to put an extra $210 of income towards your debt every single week, $420 every two weeks, or $840 a month. That can be done by redirecting funds that you’re just reallocating how you’re currently thinking about your money. You can prioritize extra funds. And then the third thing is you can also increase your income.
So I hope this episode was helpful in helping you rethink how you’re paying off debt this year. And I’m excited to celebrate with you in December when you’ve paid off an extra $5,000 worth of debt. If you’re listening to this podcast episode and you’re like, Keina, I need your help, I’m here to help you. Go to the show notes. You can apply to work with me and we will work together for five months. And I, on a consult, I will tell you exactly how I can help you. You might think like Keina, but you don’t understand my special circumstance. I promise you, I do. And that’s what my consult is for, is for us to be able to talk. We have a whole hour to talk about what’s going on in your life and then building a plan out for what we will work on in five months.
And so we can pay off your debt and also help you save money for the thing that you’re working towards. Maybe you want to buy a house, maybe you want to have a baby, maybe you’re looking to get married, whatever that thing is. So I look forward to chatting with you. Like I said, if you want one-to-one support, apply to work with me. Until next time, have a great week.
Outro: Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
