Is it possible to become debt-free in one year? Some people have low enough credit card balances that they can become debt-free by the end of the month. Others have higher balances and may have had debt for several years.
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For some, 2025 will be the year they finally break out of debt. Each person has a different playbook for getting there, but several experts have shared their biggest tips and life hacks for accomplishing the goal of becoming debt-free with a fairly straightforward solution.
Create a Budget
Jen Reid is a financial planner and the founder of Base Financial Planning. She got straight to the point about how creating a budget or updating your old one can lead you on the right path.
“The best decision you will ever make is to get on a budget — understand your cash flow,” she said. “Do you need to make more money? Can you pick up a side hustle or sell things to make some quick cash and pay off debt? Do you need to cut expenses? Usually, most people need to have the guard rails of a budget to help them see where they are overspending. Cut out things that are not a priority and live within your means.”
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Move Back in With Your Parents
Multi-generational properties are making a comeback as families opt to live together instead of everyone moving out after college. It makes sense for young individuals and couples since housing is nearly everyone’s biggest expense.
While young adventurers and recently married couples may not like the idea of moving back with their parents, it can be a great financial move that gets you out of debt and accelerates your wealth. Drew Boyer, CFP and founder of Boyer Financial Group, shared how multi-generational houses can help couples and young adults pay off their debt.
“I’ve had younger, married clients stop renting or even sell their home at a gain and choose to move back in with their parents for 1-2 years in order to achieve debt-free status,” he recalled. “This may not be an option for all, but if it is and this is your goal, then you need to do what you need to do. Housing costs are typically the largest expense per month in anyone’s budget, so if you can lower it to zero, you’ll be able to pay down debt at a rapid pace.”
If living with your parents isn’t feasible, you can also live with roommates and split the rent.
Get a Lower Rate on Your Current Debt
Although you can’t get rid of your debt with a magic wand, you can secure a lower interest rate by making some changes. Reducing your APR will result in less interest accumulation, and you can make more progress with the principal.
Casey Brueske, CCUFC and Community Education Development Specialist at PenAir Credit Union, shared some of the ways you can get a lower rate on your debt.
“Transfer your balance to a credit card with lower rates,” he said. “By lowering your interest rates, more of your payment goes toward reducing the principal balance, allowing you to pay off debt faster. If you have several credit cards with balances, transferring them to one card can simplify your payments. A single monthly payment is easier to manage, helping you stay on track with your debt repayment plan.”
Brueske also mentioned personal loans and HELOCs as financial products you can use to secure a lower interest rate for your debt.
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This article originally appeared on GOBankingRates.com: Debt-Free in a Year? A Simple Plan Could Get You There
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