How I’m Paying Off Debt

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In this episode of Quick Money Mondays I talk about my 7 step plan to get on top of and pay off my debt in the next 12-24 months.

0:00 – Welcome to Quick Money Mondays
0:38 – Step #1: Don’t Get Deeper in the Hole
1:38 – Step #2: Reduce My Expenses
4:09 – Step #3: Prioritise My Debt
5:57 – Step #4: Create a Cash Flow Plan
7:36 – Step #5: Work Hard To Increase My Income
10:38 – Step #6: Create a Cash Flow Buffer
12:24 – Step #7: Methodically pay off my debt

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Hi everybody and welcome back to another quick money Monday where we talk about finance and money because we absolutely love it. I’m Ryan from on-property, helping you achieve financial freedom. And one of the things that you may need to do to achieve financial freedom is pay off debt. And that’s something that I’m focused on this year, maybe into next year as well. And so in this episode I want to talk about exactly what I’m doing and the process that I’m taking in order to pay off my debt. So I’ve kind of written it down step by step the way that I decided to go about it. So the first step is not to get deeper in the hole. So when it comes to paying off debt, my number one goal is to not acquire any more debt in the process. So to be earning enough money and be living within my means that are not using debt that I’m acquiring in order to pay for old debt that I have.

So I want to live within my means. I want to not be expanding my debt and then I want to have excess on top of that in order to pay off debt from the past. So step number one is definitely to not get into any more debt. And so that’s a really big part of my process and something that I’m really, really focused on and doing everything within my power to not do that. So that means no credit cards, no personal loans, no business lines, no anything like that. So we’re not going to get into any more debt. We’re going to just focus on living within our means and pine of the day. Step number two was to reduce my expenses. I’ve talked about this a few times on the channel. I did an episode with Ben Everingham on some things we did in our lives to reduce our expenses and to improve our budget.

I’ll link that up in the description down below, but the me reducing my expenses is absolutely key for step number one, which is to not get into any more debt. So I run a business, I’m relying on the cashflow of the business that can fluctuate from time to time. I can have good months and I can’t have bad months. I don’t have a stable employee income like some people out there. So for me, reducing my expenses to the absolute minimum, both in my life as well as in the business has been absolutely key. So that means just cutting back on anything frivolous, anything that was kind of excessive that I wasn’t really using. So I’ve lowered my phone bill. I’ve lowered my Internet bill and currently staying with family in order to save money on rent for the short term, I’d definitely want my own place.

I wanted so badly. It is great living with my dad. My Dad is awesome, but I have three kids that I have half the time. I want them to have their own rooms. I want to have my, my own space and my own place, but short term, while income stabilizers, I’m reducing my expenses as much as possible so that the money that I would’ve spent on rent can now go towards paying off that debt faster. Also when it comes to day to day budgeting, I’ve been spending less than I earn and less than my general weekly budget. So basically been doing a lot of things, little things in my life to try and say under budget. I really should stop buying coffee and should make coffee at home. But I haven’t quite got there yet. So that’s probably something for this week will be stopped buying coffee cause that’s probably $5 a day, $35 a week that I could be saving.

So maybe coffee a couple times a week, but not every single day. But I have drastically reduced my expenses so that again, the goal of reducing my expenses is let’s not get in any more debt and let’s have as much money as possible to pay off debt as quickly as possible. I’m kind of someone who does things in sprints and imburse and in intense focus and I can do that for a short period of time. So I kind of want to smash this debt as quickly as possible. Step number three for me was to really prioritize my debts and to put all of my debts down on paper. So I’ve got different data, credit card debt, I borrowed some money from family, I’ve got some tax that I need to pay as well. And basically the goal here is to write it all out and to be absolutely clear on what debt I have as well as be clear on one of my financial commitments going to be for the year as well.

So they’re not necessarily dead, but the things that I’m going to have to pay for in the future. So this is things like school fees, health insurance, registration for the car and stuff like that. So basically I’ve looked at those major expenses as well as the debt that I have and then prioritize those things. So by prioritized, I mean look at when they need to be paid. So school fees for example, are paid quarterly. So I’ve got school fees that will come up in April. I think that I need to pay and then because some of my tax needs to be paid that has certain dates that that needs to be paid as well. So prioritizing is looking at, okay, what is the most urgent things that you need to pay off as well as looking at the interest rate that you’re paying on these debts as well.

Some people like to do the snowball effect, which is to pay off the smallest debt first. I don’t really have that luxury at the moment because I have expenses that are coming in certain months of the year that I need to be prepared for. So for me it was all about running down, seeing exactly on paper, everything that’s happening this year. So all of my debt as well as all of those major expenses that are coming throughout the year. And then prioritizing those and looking at, okay, what are going to be my financial commitments and is step number four, which is to create, uh, a cashflow plan in order to stay a fuck a float. So creating a cash flow plan is looking at the cashflow that’s coming into my life. So for me, that’s income from my businesses. So look at the cashflow that is coming in, look at the expenses that will need to go out as well as the debt repayments that will need to be made and basically create a plan so that I always have enough cash to meet my commitments.

And so there’s a bit of juggling involved there where you’ve got to work out, okay, do I need to spend less money in this month because I’ve got this big bill? Is it foreseeable that I can basically continue to pay for the commitments that I have and to pay the debt without at any point throughout the year running out of money or going into the negative? Because that would bring me back to step number one, which is don’t acquire more debt. So basically trying to create a cash flow plan, especially because I have a business that some months I get good income, some months I don’t get good income. I’ve got some websites that are seasonal, so they might do better in the winter months and in the summer months or in the summer months than the winter months. So I’ve got to take all of that stuff into account to make sure that I won’t run out of money.

So that was my next step. That might not be required for someone who’s an employee and who has a more simple income structure than me. But that’s something that I needed to look into with sue credit cashflow, plan to stay afloat and never enter a point where I don’t have enough money to pay my bills, to pay my interest, to pay my debt, commitment to pay my school fees, et Cetera. Step number five is then the every day step. And that’s to work hard to increase my income. So I have my own business and I work on that during the days that I don’t have the kids as well as when the kids are at school or in Kindie. I’m working on that. But I’ve also been increasing my work hours by working at night as well. So when I have the kids, I will put them to bed and when they’re in bed, I probably get a couple of hours, two to three hours at night where I would love to just relax, eat some sorbet, um, and watching Netflix.

But instead of doing that, I am doing work. Now work is really difficult for me to do at night. That’s not something that I enjoy at night. My brain is not, it’s freshest at that time either. So what I do with my work is that I scheduled things to do in the night that don’t require intense brainpower. So one thing that I do in my business is I write articles for a bunch of my websites that can be quite intensive, creative wise. So I need to have a lot of creativity to be able to write a good article. But something that requires less creativity is researching the articles and creating a framework. So creating your subtitles and the structure of the article basically. So at night I’ll do things simpler like research. I’ll do things like structuring articles. I’ll do things like editing videos. So making videos, you’ve got to be on point, you’ve got to be excited like I am now in order to record them.

That’s not going to be me at nine or 10 o’clock at night. So I don’t put any recording or anything like that in that time slot. It’s simpler things where I can sit down and relax into it or it might not be even editing videos, but more just looking over the videos that are already edited and writing out my notes for Youtube and the websites. So I specifically work on things that I know I can do at that point in time. But yeah, step number five is to work hard to increase my income. So for someone who is an employee that may be through working outside of your job and maybe through working hard at your job to get a raise and maybe through getting a different job in getting more income, it might be a side hustle or side business that you do. It’s up to you how you do that.

But for me, this is the most important part of my debt reduction plan is create more income. In my life. So I’m reducing my expenses, I prioritize my day and I’ve got a cash flow plan. But to accelerate that, I want to make more income on top of that. So, and not getting into any more debt and spending as little as I can, but that’s not going to pay off debt as quickly as I would like. So my goal is to increase my income and I work in a passive way. Sort of work that I do today will then go on and create extra passive income for me. So the same time I’m growing my passive income, but I’m growing my everyday monthly income as well, so I can pay off more debt. So it’s kind of killing two birds with one stone for me, given the line of work that I do and the job that I have, step number six is to create a cash flow buffer.

So this is something that I’m doing when I’m having good months. So the month of February was quite a good month for me in the business. So things went pretty well, better than expected, which means I have a little bit of surplus of income from that month. Now what I would like to do with that income is just immediately put that income onto debt and to pay that off and to have that paid off and obviously not be paying interest on that and stuff like that, but that to step number four, creating a cash flow plan. I know that I may have months that are worse than expected in the future, so I know that maybe I won’t earn as much income as I would like in a month or that I would need to in a month to not get deeper in the hole. Why we talked about in step number one, so for me when I’m having good months like I did in the month of February, it’s about creating that cash flow buffer, so putting that cash aside, making sure that I don’t spend it, but having it there to meet the financial commitments that I have to make sure that I don’t get deeper in the hole.

Now if I have multiple good months in a row, then that cash flow buffer is going to grow and then maybe I can use that to then accelerate the payments of my debt. But at the moment I’m building that buffer so I’ve got it. So when those payments come up, I know I’ve got money to pay them, even if I have a bad month in the business. So creating that cashflow buffer’s really hard and so hard because I just, I want to pay off that debt as quickly as possible. But I think that’s really important for me having a business that I need that cash flow buffer. So I’m going to go about it. And then step number seven is to methodically pay off the debt or to have a debt payment schedule. So I’ve got a plan that I’ve created, actually I need to kind of work on that plan a little bit more, but I’m formulating a plan of exactly how I’m going to pay off my debt and how quickly.

So creating a plan that is realistic to pay off my debt in the timeframe that I have, ideally be 12 months, but I think I’ll set the plan for two years to pay it off in two years. And then obviously if things go better than expected and that buffer builds up, then I will excel more right that and pay it off. But basically that’s kind of similar to creating that cashflow plan, but it’s just having that structure to methodically pay off the debt. So I know that every single month I’m not getting deeper in the hole. I know that every single month I’m paying off my debt that it will be paid off. And then anything that I achieve above and beyond what I need to do to pay off my debt, then goes into that cash flow buffer and is there in case I need it. And if that grows large enough, then I will siphon some of that off to pay off debt faster, which will be exciting.

So they have a, just a little bit of a discussion. This is what quick money Mondays is about talking about money because it should be normal that we talked about money. It’s such a big part of our lives. So I’m currently in debt, so we’re talking about it. Okay, so I hope that you are enjoying these discussions around money, sometimes quick money Monday and we’d talk about different concepts around money. Last weeks. One was really good that a lot of you liked, which is should you pay off debt or should you invest your money? So I will link that up in the description down below. Go ahead and check that out if you haven’t already. That one got a really good response and people seem to like it. Sometimes we’re talking about concepts like that and sometimes talking about more personal things in my life, but we’re chatting about money and we’re having fun while doing it.

So I wish you the absolute best in paying off debt in your life. If you have debt or if you are growing your income, if you’re investing, if you’re working towards financial freedom, maybe doing the two property to financial freedom strategy. That’s absolutely awesome. I wish you the best of luck in whatever it is your doing to move towards financial freedom. Thanks so much for tuning in today, everyone. Again, please go ahead and check out that episode I did on saving money. I mean investing money versus paying off debt. That was really interesting how your cashflow position could be doubled doing one versus the other. So go ahead, check that out. When to beat in the description down below and until next time, stay positive.

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