How To Repay Debts While Maintaining Your Financial Freedom

Learn effective debt repayment strategies to easily manage and free yourself from financial burdens.

Who doesn’t want to be financially independent? Of course it the dream of everyone to be financially stable and perhaps live his or her dream life. There are many factors that can hinder an individual from achieving financial freedom, one of them being debt or debts. Financial freedom is a process or rather a journey that takes sometime. Debt on the other hand is a financial burden. As you can see, planning for financial freedom while having a debt is like walking while carrying a heavy load, which can make your journey difficult and stressful. This calls for debt repayment to make your financial goals easy and faster to achieve. In this article, we are going to explore how you can achieve your financial goals while repaying your debt simultaneously.

Understanding the Impact of Debt

Having a debt whether small or big will cause a significant impact to you in many ways or aspects of life. Debt can impact you healthwise by causing stress, anxiety and even depression. These mental issues can affect your quality of life and general productivity. Just remember that peace of mind is critical to ones health and well being. Economically, debt can also affect your financial growth in many ways. Debt repayment repayment reduces the available cash for savings and investments. You can also miss out on opportunities for lack of finances. Defaulted debts can cause negative ratings on your credit score which can limit your credit opportunities in future. Debt can impact you even beyond what we have discussed.

Step 1: Assess Your Financial Situation

Your financial situation will determine in a great way your ability to repay debt and how much you can commit to debt repayment each month. At this stage, you need to examine your income which is your salary, rent income, interest and profits if any and even side hustles. Also try to track your debts and understand how much you owe creditors. Finally, have a keen look at your expenses. Expenses could be either fixed or variable as discussed below:

Fixed expenses

As the name suggests, these are costs that do not change each month, they remain constant and include expenses such as rent or mortgage payments, insurance premiums, utility bills and debt payments. Since these are unavoidable expenses, they should be accounted for first in your budget.

Variable Expenses

Unlike fixed expenses which remain constant every month, variable expenses are fluctuating costs such as groceries, entertainment, transportation and discretionary spending. Variable expenses can be adjusted based on financial priorities and goals.

Pending payments / Debts

Now, you need to understand how much money you owe to creditors and any financial obligations that you may have. Start by list down all your debts. Keep in mind also to record the maturity of your debts and interest rates. The interest element determines how cheap or expensive the debt can be. In this regard, make a priority list of debts basing on interest rate and make sure you start by repaying high interest debts to save on interest costs.

Step 2: Choose the Best Debt Repayment Strategy

After carefully assessing and examining your debt situation, you will have the rightful information that will guide you on the best debt repayment strategy. With many debt strategies available, you are only supposed to choose one that aligns with your interests and financial situation. Below are the commonly known debt repayment strategies.

The Debt Snowball Method

In this method, you organize your debts from the smallest to the largest one, ignoring the interest rates element. Then start making small payments on all the debts while making huge payments on the smallest debt with an intention to clear it. After clearing the first smallest debt, you now move to the second smallest debt. Now that the smallest debt is done, those huge payments will be transferred to the second debt while maintaing the small payments on all debts. The second debt will now receive small payments plus payments that were previously made to first debt. The process continues like this up to the last debt.

This method boosts the borrowers motive to repay debts. After repaying the smallest debt, there is fresh energy and confidence that pushes borrowers to repay subsequent debts. This momentum keeps the fire burning. The disadvantage of this method is that it ignores the interest element which are additional costs to the borrower.

The Debt Avalanche Method

IThis method is similar and at the same time different to the Debt Snowball method in a number of ways. While the Debt Snowball method organizes debts from smallest to the largest basing on amounts or debt balances, this method also organizes the debts from the smallest to the largest but based on interest rates. Debts with the highest interest is considered first and the sequence continues up to the debt with the smallest interest which will be repaid last. Just like Debt Snowball method, minimum payments are made on all debts but in this case, the highest interest debt receives extra money.

This method puts more emphasis on reducing costs by paying off high interest debts first. Remember that financial planning and management is all about minimizing and saving costs and this is one of the ways to save costs.

Step 3: Adjust Your Budget to Free Up Money for Debt Repayment

At this stage, you are now in the mood of repaying your debts and of course you will have to make financial sacrifices or changing your lifestyle in order to comfortably accommodate the burden of repaying debts. This could be well fixed through reviewing your budget and making some adjustments where necessary. Below are some of the initiatives you can take in this regard:

Avoid Unnecessary Spending

To manage this, focus only on your basic needs and avoid wants or those expenses you can live without such as upgrading your smartphone or iphone, partying and out door dinners and impulse purchases. Instead of using your personal car or uber, you can use public transport to save on your transport costs. You can also move into a slightly cheaper house to save on rent costs and channel the money into debt repaying.

Negotiate Lower Bills

Negotiation is a critical skill that can save you dollars of money. On every expense you make, make sure to negotiate for favourable prices. Also, take advantage of offers, discounts and deals especially from service providers and even chain stores and supermarkets. This strategy can save money that could be chanelled into debt repayment.

Increase Your Income

While cutting costs or expenses can make you retain more money, increasing your income can accelerate your progress. There are many possible ways to boost your income such as side hustles, freelancing, working for exta hours at your work place, bargaining for salary increment and selling products and services. These exta income avenues will make it easy and faster to clear your debts.

Step 4: Avoid Accumulating New Debt

After repaying initial debts, individuals still find themselves taking on new debts. Here, the problem is not debt itself but what is causing them to take on debt. This could be inadequate financial planning or lack of financial education which means that these individuals could be financially illiterate. Financially literate people understand how and when to take on debt. They are also well informed about advantages and disadvantages of debt and they even know how to avoid debt or to live a debt free life. In short, understand what is making you to be debt reliant and fix it or else it will be hard to break that debt chain.

Step 5: Stay Committed and Track Progress

In your debt repayment journey, an important piece of information is that you will note achieve everything on day one. It is a process that takes months and years so you need to be highly motivated. To keep going, track your progress at every step. Note out successful steps you made and even celebrate them to be warmed up and to get momentum that will take you through the next steps. To track your progress over time, you can use tools like charts, graphs or just progress tracker.

Step 6: Build an Emergency Fund to Prevent New Debt

Most of people who have debts are those who were financially pressed but did not have any way out other than borrowing. For instance, someone felt sick and went to hospital, after treatment, he or she was billed $2,000. Because she didn’t have any alternative to raise the hospital bill, she took on loan. Now, what if she had some savings or an emergency fund? Of course the fund could have raised the money for the bill, leaving her or him debt free.

As a way of financial preparedness, an emergency fund can save you in many ways and it is easy to build one by allocating a portion of your income to the fund to take care of unexpected expenses or costs. Experts recommend that the fund should have enough money that can sustain you for 6 months to one year incase you lost your job and other sources of income.

Boosting Your Income to Accelerate Debt Repayment

As a general rule, you are going to repay your loans from your income. The loan repaying period entirely depend on the loan instalments or the amount of cash you are paying each month towards your loan. If the instalments are significant, it means that it will take you a short period of time to clear the debt and it will take much longer if you are making small instalments each month.

There are several ways to boost your income such as salary increment, working extra hours, side hustles, freelancing or just selling products and services. You can also reduce your expenses as well especially luxurious things and other wants to save more money.

Why Increasing Income is Essential for Debt Repayment

Just as we have discussed in the previous chapters and paragraphs, increasing your income supports debt repayment in maany ways. First, it eases financial pressure in a way that you will not have to deny yourself or sacrifice alot of resources while repaying debts. In this case, you will have a relaxed mind as debt repayment will not affect most of your programs such as savings and investments.

The other reason to increase your income is that it reduces the loan repayment period. This means that with more cash at your disposal, you will commit more resources towards loan repayment which will enable you to clear the balance in a short time. For example, if you owe $10,000 and you make monthly payments of $50, it could take over a decade to pay off the balance. However, if you increase your monthly payments to $500, you could clear your balance in less than 2 years.

Ways to Increase Your Income and Pay Off Debt Faster

1. Negotiate a Raise at Your Current Job

To most people, salary is the main source of income and determines the level or lifestyle. If you are one of them, you need to invest in knowledge and skills to be more competitive. However, you will need a tangible evidence which is good performance in duties that will support your bargaining for a salary increment. You can do this by documenting a list of your achievements and contributions in the growth of your company. You can describe how you improved various processes in the company that led to operational efficiency, cost saving and general profitability.

2. Take on Freelance Work or a Side Hustle

The rise of the gig economy has transformed the way people earn money, making it easier than ever to supplement their regular income. Whether you possess specialized skills or are simply willing to take on part-time work, side hustles offer a valuable opportunity to generate additional income. This extra cash flow can be instrumental in accelerating debt repayment, improving financial security, or even funding personal projects.

Most common side hustles:

Freelancing

One of the most popular ways to earn extra income is through freelancing. If you have expertise in areas like writing, graphic design, marketing, programming, or video editing, platforms such as Upwork and Fiverr provide a direct connection to clients in need of your skills. Freelancing offers flexibility and the potential to scale your earnings based on demand and experience.

Online Coaching

Another great option is online tutoring. If you excel in a particular subject, you can leverage your knowledge to teach students on platforms like VIPKid, Wyzant, or Tutor.com. This allows you to earn money while making a meaningful impact on students’ learning journeys.

Selling Handmade or Digital Products

For those with a creative flair, selling handmade or digital products can be a lucrative endeavor. Platforms like Etsy enable artisans to showcase and sell their handmade goods, while digital marketplaces such as Gumroad offer an avenue for selling e-books, templates, and other digital resources. This can turn a hobby into a sustainable source of income.

Driving for Rideshare or Delivery Services

Driving for rideshare or delivery services is another flexible way to make extra money. Companies like Uber, Lyft, DoorDash, and Instacart allow individuals to work on their own schedules, whether that means picking up passengers or delivering food and groceries. This is an excellent side hustle for those who enjoy being on the road and meeting new people.

Flipping Items for Profit

If you have a knack for spotting good deals, flipping items for profit can be a rewarding pursuit. By purchasing discounted or second-hand items and reselling them on platforms like eBay, Facebook Marketplace, or Poshmark, you can generate a significant income with minimal upfront investment. Many successful resellers have turned this side hustle into a full-time business.

A side hustle doesn’t have to be a lifelong commitment, but dedicating just a few extra hours each week to earning additional income can have a dramatic impact on your financial well-being. Whether your goal is to pay off debt faster, build savings, or simply explore new income streams, the gig economy offers countless opportunities to take control of your financial future.

Monetize Your Skills or Hobbies

Many people possess incredible talents or deep passions but often underestimate their potential to generate income. What if the very things that bring you joy could also bring you financial rewards? With the right strategy and dedication, your hobbies can evolve into profitable ventures, allowing you to do what you love while securing an additional income stream.

Photography

Take photography, for example. If you have a keen eye for capturing moments, there’s a vast market waiting for your work. You can sell stock photos on platforms like Shutterstock, where businesses and content creators constantly seek high-quality images. Alternatively, you can offer your services for events such as weddings, birthdays, and corporate gatherings, turning your passion for photography into a lucrative business.

Fitness Coaching

If fitness is your calling, why not transform it into a profession? With the increasing demand for health and wellness coaching, becoming a certified personal trainer or offering virtual fitness sessions can be a fulfilling way to help others while generating income. Many people are looking for guidance to stay in shape, and your expertise could be the key to their fitness success.

Music or Art Lessons

For those musically or artistically inclined, teaching others can be both rewarding and profitable. Whether you play an instrument or have a knack for painting, offering lessons can help you share your knowledge while earning extra money. The growing interest in creative skills means there is always a demand for personalized instruction, whether in-person or online.

Blogging or Content Creation

Another powerful way to monetize your passion is through content creation. Blogging, launching a YouTube channel, or starting a podcast can eventually lead to earnings through ad revenue, sponsorships, or affiliate marketing. It requires consistency and effort, but over time, a dedicated audience can turn your content into a source of sustainable income.

The beauty of turning your skills into a business is that it allows you to do what you love while reaping financial benefits. Whether it’s to pay off debt, build savings, or gain financial independence, your passion can be more than just a pastime—it can be your pathway to prosperity. All it takes is the courage to start and the persistence to keep going.

3. Work Overtime or Pick Up Extra Shifts

If your employer offers overtime pay, taking on additional hours can provide a significant income boost. Many companies offer time-and-a-half or double pay for extra hours worked, which can quickly add up.

For those working in industries such as healthcare, retail, or hospitality, requesting additional shifts or seasonal work can increase income without requiring a job change. Even if overtime isn’t available, some companies offer bonuses or incentive programs for employees who exceed performance goals. Taking advantage of these opportunities can help accelerate debt repayment.

4. Start an Online Business

Starting an online business may require some initial effort, but it has the potential to generate long-term passive income and provide significant financial growth. There are several profitable online business models to explore, including dropshipping, where you sell products without handling inventory through platforms like Shopify, and affiliate marketing, which allows you to earn commissions by promoting products via blogs, YouTube, or social media.

Another popular option is print-on-demand, where you create custom designs for T-shirts, mugs, and posters and sell them on sites like Teespring or Redbubble. Additionally, if you have expertise in a particular subject, you can sell e-books or online courses through platforms like Udemy or Gumroad. While it takes time to build and scale an online business, the potential earnings can far surpass traditional side hustles, making it an excellent choice for those committed to long-term financial success.

Conclusion

Becoming debt-free is all about reclaiming control over your financial future and unlocking new opportunities that were once hindered by financial burdens. The journey to debt repayment requires discipline, patience, and a well-structured plan, but the rewards far outweigh the sacrifices. All you need to do is to create a realistic budget, choose the right repayment strategy, cut unnecessary expenses, and increase your income to accelerate your progress and break free from the cycle of debt.