You may be able to pay off your debt faster than you think, even if you don’t have a ton of extra money available.
Author and personal finance expert Tiffany “The Budgetnista” Aliche spoke at OneUnited OneTransaction, a conference on closing the racial wealth gap, about her top tips for paying down debt. She recommended putting all the “windfall money” to pay off her debts.
“Unexpected money is any money you expected to spend but didn’t, or money you didn’t expect to receive but did,” Aliche said.
1. Money you expected to spend, but didn’t
Aliche gave the example of buying a $50 item, only to find out when you go to the register that it’s half price. Instead of buying a second item to get two for the price of one, put that extra $25 toward your debt. That $25 is unexpected money that you didn’t plan on having.
Or maybe you’re out with a friend and, at the end of the meal, they grab the bill. That’s $30 of unexpected money.
“You were planning on spending that $30, $30 just slipped your mind,” Aliche said. “Let it really go away, but put it in your debt. And if you’re debt-free, put it in your savings.”
This strategy may seem like it doesn’t make a lot of money. But think of all the times in the last month that a friend has treated you or a store has made an offer.
It’s easy to forget to put $25 here or $30 there toward your debt, which is why Aliche recommended having apps ready on your phone. If you have credit card debt, download the credit card app on your phone. As soon as you get in your car after brunch with your friend, go into the app and pay off $30 of your credit card debt.
2. Money you did not know you would receive
You can also put money you didn’t expect to receive toward your debt. Maybe you get an unexpected bonus or raise at work, or money for your birthday or a vacation.
“Even your tax refund check could be windfall money,” Aliche said. “Even though you expect it, it’s money outside of your normal job.”
Aliche makes every effort to reallocate this money within an hour of receiving it.
Bonuses and birthday gifts will likely be more substantial than the money you save on discounts. Instead of $25 here and $30 there, it could be more like $100 here and $200 there. When you combine these two debt settlement strategies, you could pay off hundreds or even thousands more in a year.
About the Author
Laura Grace Tarpley is an editor at Personal Finance Insider, covering banking reviews and guides. She is also a Certified Educator in Personal Finance (CEPF). During her five years of covering personal finance, she has written extensively on ways to save.