5 Proven Hacks for Paying Off Debt Fast, According to Rachel Cruze
Dealing with debt isn't fun. For many people, it feels like an ongoing source of stress that never seems to end -- no matter what they do.
But it doesn't have to be that way. In a recent YouTube video, money expert Rachel Cruze shared her top five underrated tips for quickly paying off debt. Here are those hacks and how you can start using them today.
Watch Out: 10 Mistakes People Make While Paying Off Debt
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Take On a Side Hustle
As of the latest Census data (2024), the median household income was $83,730. Excluding taxes, that's roughly $6,978 a month.
If you're struggling with debt, Cruze suggested doing whatever you can to increase your income. This might mean selling things on sites like Etsy or Facebook. Or it could be picking up a few evening or weekend hours as a Lyft driver or dog sitter on Rover. Even if you only earn a few extra hundred bucks a month, that can go a long way toward paying down your smaller debts.
Not sure which side hustle to choose? Consider your availability, current skills and income needs. And know that this doesn't have to be a forever thing -- only as long as it takes to get ahead of your finances.
Cut Out Unnecessary Expenses
According to Experian, the average American pays $1,237 a month to cover their debts. This does include mortgages and other types of debts, including credit cards, but it's still a substantial chunk of cash.
If you're trying to quickly pay off debt, you might need to enter what Cruze calls a "season of sacrifice." Part of this means cutting back on nonessentials like:
Dining out
Premium subscriptions or memberships
Expensive trips
Social outings or events
These are short-term sacrifices and, while they're certainly not easy to do, they're often worth it in the end. Once you're debt-free, you'll have more money freed up for other things. Just as importantly, you'll have greater peace of mind knowing.
Check Your Insurance Policies
Some people have a "set it and forget it" view when it comes to their insurance policies. And while this can work for a while, you could be spending more than you need on insurance.
Cruze suggested checking your insurance coverage to see if there are ways to save there. Take your car insurance as an example. According to Progressive, the average monthly car insurance payment is $87.56 to $165.02, depending on where you live.
Whatever you're paying, ask yourself: Is it what you need? You might be paying for something you don't use. Or you could be eligible for certain discounts, such as through a bundle package or because of safe driving habits.
Check your other insurance policies, too. You never know where you can save, especially if you've experienced major life changes since you first signed up.
Adjust Your Tax Withholdings
Last year, the average tax refund was $3,116, as reported by the IRS. But receiving a high refund is a bit of a double-edged sword.
Yes, you get a large paycheck once a year. But the downside is that you're losing more from your monthly paycheck than you should.
Instead of waiting for that large check to come through, Cruze suggested adjusting your tax withholdings. This means a smaller refund, but you could get a few extra hundred dollars each month to put toward your debts.
Temporarily Stop Retirement Investing
If you're trying to quickly pay off debt, sacrifices must sometimes be made. Rachel Cruze's suggestion is to suspend your retirement investing, but only for a short period.
You'll lose out for a bit on things like employer matching, but you'll have more money to put toward those debt payments. And once you've gotten a handle on those, you'll have more money freed up for larger investments down the road.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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