Reduce your debt without starving yourself

Five Steps to Reduce Debt and Pay Off Loans

financial freedom after paying off loans and reducing debt

If you are visiting this article in search for ways to reduce your debt or pay off your loans, congratulations in taking the first step towards improving your financial situation. I know friends for whom all it took was this first step that ultimately broke their debt wall.

What it took for me to reduce my debt

It can happen to the best of us. Take me for example – Once burdened under student loans, I couldn’t afford the payments despite a job and tried to repay the loans with credit cards and more loans… Despite being financially savvy, the stigma of missing a payment was too much to bear and I ended up heavily in debt, topping more than 55K in a matter of 3 years. I avoided looking at the problem straight ahead until the day I decided to be honest with myself for a better future. Before that moment, I was mentally unprepared and didn’t even know how much debt needed to be paid off, leave alone a plan to pay it off.

But I did it. With patience and discipline, it took 3.5 years to be free of my debt burden. And now I manage my debt within reasonable limits (it is important to have some debt to keep your credit in good condition).

And you can do it too. Take a moment to acknowledge that this is a process that may be long for some and requires patience and discipline. Don’t set yourself up for failure with unrealistic goals. There is no need to starve yourself or your family in the process. Below, we explain some effective and proven ways to reduce your debt.

I will start by saying though that these are self-serving tips and not meant to be professional financial advice. If you have a lot of creditors chasing you for loan or other payments, you may need to seek professional help, e.g., a certified financial planner. As soon as you start seeing benefits, please do come back and share your story in the comments section as it will encourage others. If you choose to leave your email address with us, we can follow up with you to find out how you are doing and provide encouragement or answer any general questions, if needed.

Your step one was searching for this blog. Good luck with the rest! 

Step Two: Make a list of your earnings and expenses

This is a reality check step which may make you feel miserable at first but it is medicine to the disease and you will only be better if you take it. Here are the things you need to do in order:

  1. Tools – First, make sure you have an hour or two to yourself because you need to be focussed on this very important task. Grab a pen and a paper or if you want to do it electronically (preferred), open a document or excel file.

  2. Income – Write your current estimated monthly income. Don’t make the mistake of trying to determine future income, you should only list what you are earning now. Be conservative and use a base number you can rely upon. If you don’t have a steady stream of income or are on commissions but can make a good guess, use your judgment and put the minimum amount you think you will earn.

  3. Expenses – This is where you have to spend a good amount of time and work in the following order:

    a. Number all the days in a month in one column from 1-31

    b. List out your expenses against each day of the month in the next column. Use your most recent bank or card statements. Think about where you just spent your money and what expenses are upcoming. For those that you pay quarterly or annually, you should still list them in monthly fractions.

    c. Give each expense a tag or a category like Home, Car, Work, Groceries etc.

    d. Add all your expenses for a total and a total by category.

  1. Net savings or deficit – Finally, deduct your total expenses from your total income and that will give you your net savings or deficit.

Feel miserable looking at the numbers? Now what if I told you that you can cut your expenses between 10-30% easily? Whether you have small savings or a deficit (like I did), you just took a big step in reducing your debt or paying off your loans and it is sure to help you.  

I created this tool for myself to help pay off my loans. If you would like to get a template, feel free to email us and we can share it.

Step Three: Mark the expenses you can reduce right away

It is very satisfying when you can find a few expenses to cut out completely or reduce. If you think there is nothing you can cut, it is not true (at least for most of you) and you are not alone in having that as your first thought. I was in the same spot once but I had to make a choice knowing these would be sacrifices that I would be able to live with (or without). Go through each category one by one and each expense one by one to determine if you really need it. Here are some examples of things you can cut or reduce:

  • TV: There are three options depending on what you really need:

    • Option 1 – Cut the cord. You do not need cable or dish. If you are bored, go to the library. If you have kids who get bored, go outside and play with them. If it is raining outside, play I-spy inside. I can keep going… but the point is you need to find something productive to do with your time.
    • Option 2 – Streaming services. If you still must watch a few channels, you can try streaming services if you have internet at home. As more and more channels forte to be online, you can get cheaper subscriptions (e.g., $5-10 per month for your favorite channel streaming to your TV).

    • Option 3 – Check your bill. If you still must keep your cable or dish, you can do two things. First, check your bill for add-on features. A lot of times you may be getting charged for services you don’t use, e.g., DVR or additional equipment rental. Second, reconsider which subscription you really need based on the channels you watch.

Likely potential savings – $30-$60 per month.

  • Internet: This is another one of those “you didn’t ask or we would have lowered your bill” situations. Internet service providers will often negotiate down from a full rate and usually have regular offers. If they don’t, simply switch if you don’t have a contract. I was able to halve my bill for a year just recently and although I am not a proponent of contracts, given the price, I didn’t mind the one-year contract (as I was unlikely to reconsider for another year). My savings – $35 per month.

  • Mobile phone: I realize most of us can’t live without mobile phones these days (debatable, I know) but you can be smart about its financial cost. You can either (a) switch to a better priced provider – these days it doesn’t matter whether you are in or out of a contract (b) renegotiate with your current provider if you are out of a contract (c) use newer services like Google Fi that can reduce your bills and only charge for data that you use. Likely potential savings – $20-$40 per month.

  • Loan payments: Interest rates are at all-time low. If you have been able to maintain a good credit score, look for options to refinance your mortgage or your personal loans. It is very easy to get a rate quote without impacting your credit so make use of those tools. But be careful that you are not lowering your payments by getting a longer term loan as you will end up paying more. Such a strategy is to be used carefully or in limited situations. Do realize that moving forward with an application for a loan will impact your credit score so do your research to be sure of your chances before you proceed further. Potential savings can be significant depending on your existing rates and credit score.

  • Mortgage payments: If you have a mortgage, this is a good time to refinance with low interest rates. However, use a good reputed loan broker instead of going to your bank directly and do your homework first. Keeping your relationship at your bank won’t save you as much as shopping around. Here are the benefits a good loan broker can provide:

    • Single credit check for multiple lenders so it won’t impact your credit score as much as multiple checks if you shopped around by yourself.
    • Little or no closing cost or cash back may be offered by the brokers. Brokers have incentives with the banks that they may share with the customers; banks don’t do that. I personally saved more than $10,000 in closing costs and have refinanced twice within a year making sure the benefits outweighed the costs of refinancing.
    • Good brokers try to get you good deals. Sometimes customer service matters more than the money they will make for the bank. In my case, my broker called me the day before closing and suggested he could lower the fixed rate a little but it would delay closing a couple of days. The decision to lower my rate was a no-brainer.

Try bankrate for a quote and it will give you some options. Do your homework and make sure you work with a reputed broker. I saved nearly $450 per month from my two refinancing efforts but I know friends who have saved nearly $1,000 per month after refinancing and consolidating debts. 

  • Gym: You should keep up your fitness but it doesn’t necessarily have to be at the gym unless what you do is only available there. Find an exercise buddy and go outside for a run or walk. This may only to be a temporary measure but it will help. If you must keep your gym membership, ask them for options as you may be paying for facilities you don’t use. There has also been a recent surge in private gyms (at least in some areas) that charge less. Likely potential savings – $50-$100 per month.

These were just some examples. We may write another feature about reducing your loan rate and other money saving tips that you can do right away so check back later. But if you want to know ways to live minimalist, there are some other measures people have taken (doesn’t hurt to go through the list for ideas). For other ideas, leave a comment or a question below for everyone to learn.

Step Four: Reduce or cut those expenses (including loan payments)

This could either take 10 minutes or 3 hours depending on what expenses you are cutting. I call this the sigh of relief step.

If you can cut your expenses over the internet, that is great and you should do it right away (don’t contemplate it too much). Otherwise, find time to call your cable company or telephone company and tell them you need to save money. Chances are they will renegotiate. But be wary of signing up for additional contracts that you will be locked into. I started with the renegotiation before I decided to cut some costs completely. It all depends on your situation.

If you don’t have the time, there are also services (e.g., who can help you although it may cost you a fraction of the savings and you will need to share some personal information with them. We haven’t tried any of these services so can’t comment on how they work. If you can do it yourself, you should as you will save more money.

Step Five: Pay down your loans and credit cards

As you start saving money, use the extra savings to pay down your loans quicker. Make it a habit from the first month of saving money if you don’t need the extra cash for something more urgent. It is much harder to do it later. By paying down your loans and credit cards, three better things will happen:

  1. You will have less interest to pay on loans or credit cards.
  2. You will pay-off your loans and credit cards sooner and can be debt free. 
  3. Your credit score may improve helping you get better finance deals (e.g., refinancing your auto loan) in the future.

I mentioned above that it took me 3.5 years to be debt free because I had a lot of debt accumulated at that time. 

Finally… Rinse and repeat

Self explanatory but you will be amazed on how your situation can change in 3-6 months. You may get a higher paying job, have unexpected expenses, or have a windfall. It is important to keep re-performing this assessment until you get to a point where you are comfortable with your debt level. From there on, you can do this once a year.

I usually do the same towards the end of a year as it helps me look back on my spending and that helps with some resolutions for the new year. That is how I continue to reduce my expenses with the examples I provided above. If you have questions on how to do an annual assessment, leave a comment and we will respond.

You can also sign up for the free credit scoring to keep track on how your score changes overtime. Don’t worry about your current score being low as much as you need to be focussed on improving it. I have noticed that small improvements can make a lot of difference and are often another motivating factor.


Once you are freer of your loan burden, go enjoy your life with the resources you have and can manage. Give back to the community and make a difference.


p dir=”ltr”>Also share your experience with others. We need to spread financial education as far as we can reach. For the last last couple generations, money was relatively easy to come by but financial education was limited. Evidence suggests that good financial education can help people in the long term. So let us get ahead of this problem and share good financial education and our experience with others. Even if you can help a few, that is better than helping none at all.

Remember that we are here for you should you need any encouragement or have any questions. While this is not financial or investment advice, the least we can do for you is share our experience and tips that have helped us and others we know. We want you to have a better life. We hope you will share your success stories and encourage others. 

Yours truly. 


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