Episode: 331 - Breaking Free from Debt: Smart Strategies to Regain Financial Control
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Debt can weigh heavily—whether it’s credit cards, personal loans, or medical bills. The good news? With the right strategies, you can take control and work your way toward financial freedom. Let’s walk through some of the most effective ways to tackle different types of debt head-on.
Tackling Credit Card Debt
Credit cards often come with high interest rates that can make paying them off feel impossible. But with focus and a solid plan, you can make serious progress. Here’s how:
- Start with a Budget: Know where your money is going. Cut back on non-essential spending and direct those extra dollars toward your debt.
- Pause Credit Card Use: To avoid digging a deeper hole, stop using your cards until your balances are paid off. Stick to cash or debit.
- Use Extra Cash Wisely: Got a tax refund or bonus? Put it straight toward your credit card balances to knock them down faster.
- Boost Your Income: Consider a side hustle or part-time job to bring in extra cash for debt payments.
- Automate Payments: Setting up automatic payments helps you stay consistent and avoid late fees.
You can use either the debt snowball method—paying off the smallest balance first for quick wins—or the avalanche method, which targets the highest interest rate debts to save more in the long run. Choose the one that motivates you most.
Smart Loan Repayment Tips
Want to make extra progress on your car, personal, or student loans? Try these tips:
- Split Your Payments: Instead of one monthly payment, try bi-weekly or weekly payments. This helps reduce interest and can shave time off your loan term.
- Ask About Lower Rates: Reach out to lenders to see if they’ll lower your interest rate—especially if your credit has improved or you’re experiencing financial hardship.
- Explore Employer Assistance: Some employers offer help with student loans. It’s worth asking about!
Managing Medical Debt
Medical bills can be emotionally and financially draining. Here are some ways to stay in control:
- Review Every Bill: Request an itemized statement and double-check it for errors. Mistakes happen more than you think.
- Negotiate for Discounts: Offer to pay a lump sum upfront in exchange for a reduced total—many providers are open to this.
- Set Up a Payment Plan: Many hospitals and clinics offer no- or low-interest payment plans. Avoid using credit cards if you can, to keep interest from piling up.
- Look for Help: Non-profits like the HealthWell Foundation or state programs can offer assistance based on income.
- Use Tax-Advantaged Accounts: Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) can help you pay for medical costs without dipping into savings.
In some cases, negotiating a lower lump-sum settlement with the provider or collection agency can also help reduce what you owe.
Final Thoughts
Getting out of debt isn’t about being perfect—it’s about being persistent. Every extra payment, every smart money move, and every step forward gets you closer to financial peace of mind. Start where you are, use the tools that work best for your situation, and don’t forget to celebrate your progress along the way. Freedom from debt is possible—and you’ve got what it takes to get there.
Resources Mentioned
The Totally Awesome Debt Freedom Planner https://www.debtfreedad.com/planner
To learn how to take the stress out of your finances so you can breathe again, follow this link: https://www.debtfreedad.com/lwp-masterclass-opt-in-page-podcast
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Transcript
Kati:
Whether you have credit cards, loans or medical bills, debt can feel overwhelming. The good news is, there are several proven strategies to pay off different types of debt. Stay tuned for ideas on how to tackle your high-interest credit card balances, ways to pay off a car loan or heal up those pesky medical bills. Thank you for listening to the Debt-Free Dad podcast, where we help everyday, normal people like you take control of your finances and live a happier, less stressful life. I'm Katie, your host for today's episode, and I've been on my journey to debt freedom for just over six and a half years and I've paid off over $211,534 in student loans, car loans, medical bills and credit card debt all on a single income. Just like there are multiple kinds of debt, there are different ways to approach paying off each of these types of debt. Today, let's talk about some of the best methods to pay off credit cards, loans and medical debts. When it comes to credit cards, the most common repayment strategies are the snowball and avalanche method when it comes to credit cards. Here are some effective tips to pay off credit card debt. The first thing you're going to want to do before you do anything else is create your budget and track your spending, know where your money is going so you can allocate more towards debt repayment. This means cutting out unnecessary expenses and redirecting those funds to your credit card payments. Second, you also need to stop using your credit cards until you can pay them off. If you're not adding more debt while you're trying to pay them down, that means you're not digging as deep of a hole to get out of. Try to always use cash or a debit card instead, and if you come across windfalls, maybe some unexpected money whether it's a tax refund, a bonus, inheritance, something like that Try and apply as much as you can towards your debt up front so you're knocking those out as fast as possible. This is great for people who are trying to just speed up your debt repayment without impacting your monthly budget. You can always pick up a side hustle to increase your income. There's so much freelance gig work, working overtime or getting a side job that can help you accelerate your debt payoff and then making sure that you never miss due dates and avoiding those late fees or overdraft charges. Set up your payments so they come out automatically from your bank account. You just got to make sure the funds are in there, all right.
Kati:
So, as far as credit cards go, there are two popular methods for paying off credit card debt. Here at the Debt-Free Debt, we focus on the debt snowball method. We want you to write down your smallest balance to largest balance of your different debts and then you want to focus on paying off that smallest balance first, while you're making minimum payments on the rest of your debts. Once that smallest debt is paid off, roll that payment into the next smallest debt and that progress will speed up for the next one and follow that all the way through. This method is best for motivating people who need those quick wins, especially if that momentum is what you need to keep going. If you are looking at the debt avalanche method, this would be where you prioritize paying off your credit cards with the highest interest rate first, while making minimum payments on the rest. Once those highest interest debts are gone, move on to the next. This is for people that are concerned with saving the most money on interest over time. However, we always say if it was a math problem, you probably wouldn't have gotten into this in the first place.
Kati:
Anytime you've got debt, if you want to hit it a little harder is making extra payments wherever possible Instead of one $600 payment every month instead of waiting for the due date. If you pay every week $150 towards that debt, anything with interest is going to just be knocked down a little bit as you continue. That makes the interest accumulation taper off and then it also shortens your payoff timeline is. Negotiate with your creditors. Call your bank, call your credit card company and ask for a lower interest rate or if they have some kind of relief plan whether it's temporary or a hardship program that helps you longer term. It never hurts to ask. The worst they can say is no. But if you don't ask, the answer is always no. A good payment history will increase your chances. Sometimes they'll offer reduced rates or waive some of the fees, but that's going to depend on the bank. Again, if you're struggling financially, like overall, it's a hardship situation those are the best methods for that. Some people just need a simple way to accelerate their debt payment. So rounding up your payments. Let's say the monthly payment for that bill is due $320. Why not round it up and make it $350? This does still help. Any little bit that you can add to your payments is going to help over time. And for some people's place of employment, they offer an employer loan repayment assistance. This is great for student loans especially, but they might offer a benefit that it never hurts to check in with your HR department and see if they offer assistance to their employees.
Kati:
Now, when it comes to medical debt, this one can be a little trickier because it also comes probably with some emotions as well. So the first thing you want to do is try and always review the bill, the itemized bill, ask for the itemized invoice on it so you can check for errors, verify all the charges, because sometimes medical billing mistakes happen and it's pretty common. This is also another place where you can negotiate with your provider and ask for some kind of discount, especially if you're paying all in full or in cash up front. If they don't have to deal with insurance companies, sometimes they are willing to just make that easier and it takes some of the work off of their end. Too Many hospitals offer hardship programs or financial assistance, so that is something that you can also request from the hospital or the provider. And then setting up a payment plan, no matter what your balance is on it. Most providers provide interest-free or super low interest payment plans and you just need to negotiate a monthly amount that fits your budget.
Kati:
Do not put them on credit cards, even if it's a zero percent and you're pretty sure you can pay it off in that period, depending on what the health issue was. If you're out of work or something else happens, there's complications and you might not be able to pay that off. That's just where it gets really risky when you start to put medical bills on a credit card. There are also plenty of nonprofit organizations available that offer financial aid for medical bills, such as the Health Well Foundation and Patient Advocate Foundation. There's also lots of state programs, depending on where you live, that may offer relief based on your income.
Kati:
If you have an employer or an insurance plan that offers a health savings account, an HSA, or a flexible spending account, an FSA, use those tax-free funds to cover any eligible medical expenses, so it's not dipping into your personal savings. And again, if it's a huge medical bill, you want to be able to ask if they will settle for an amount that's less than the overall debt you would have to call the provider, or if it has gone to collections already and be able to offer a lump sum settlement at a reduced rate. Again, it never hurts to ask if you're in those kinds of situations. I hope these are some tips that might spark an idea for you if you have these different kinds of debts that you're looking to pay off. And until next time, thanks for listening to the Debt-Free Dad.
Brad:
Now listen if you're ready to break free from living paycheck to paycheck which, if you're listening, I hope you are. You want to reduce financial stress. You want to build savings. You want to finally pay off debt for good, but you're not sure where to get started. Don't worry, we've got you covered. Here at Debt-Free Dad. Simplify my Money is sent each Sunday to your email. We make it easy and Simplify my Money. It's your step-by-step roadmap to better financial control, and you're also going to learn easy to follow strategies to manage your money effectively. You're going to get stress-free money decisions that will help you simplify your financial life with proven tips that actually work. You're also going to gain the tools and the confidence to tackle your financial goals head on. You can sign up for Simplify my Money by clicking the link at the top of the show notes. Thanks for joining us on today's show and we will see you guys on the next episode.
