9 Ways to Pay Off Debt without Spending Your Paycheck

This post originally appeared on Money Saved Is Money Earned and has been republished with permission. 

Paying off debt should be a high priority for every American. Earlier this year, consumer debt rose to $4.2 trillion. With so much uncertainty looming with the economy, along with the high debt and low savings of the average household, it’s more important than ever to work on paying off debt.

While becoming debt-free should always be the ultimate goal, it’s crucial to focus on paying off certain debts as soon as possible. These debts include high-interest debt and debts owed for depreciating assets. Credit cards typically carry the highest interest rates and so should be focused on first. Next, shift your focus to other higher-interest debt, such as student loans. Finally, focus on debts for depreciating assets such as auto loans. Although you’ll need to make minimum payments monthly toward all debt, the quickest way to eliminate debt (and avoid unnecessary interest payments) is to make extra payments.

Making extra payments can seem like a tall order when your budget is stretched thin, but there are some simple tricks you can use to find extra money to put toward your debt, all without changing your monthly budget. The trick is to avoid any lifestyle inflation by putting any newfound money toward your debt, whether it be a one-time or ongoing thing. Without further ado, here are nine ways to pay off debt without spending your paycheck.

9 Ways to Pay Off Debt without Spending Your Paycheck

1. Tax Returns

Nearly 96 million people (73.2%) of Americans received a tax refund last year, averaging $2,725. No matter the amount, your tax refund is the perfect opportunity to pay off debt without spending your paycheck. Unfortunately, most Americans use their tax refund as an opportunity to go shopping or to take a nice vacation. While you might allocate some of your refund for fun things, if you have significant or high-interest debts, you’d be wise to put the majority of that refund toward paying it down. Several thousand dollars will make a big dent in your loans, saving you a bunch of interest and increasing your financial flexibility.

2. Reimbursements

This next option for paying off debt without spending your paycheck won’t be something you can regularly count upon or make as large of an impact but can still be very effective when utilized over time. Reimbursements. In this case, we’re primarily talking about reimbursements from your employer, but this could also be reimbursements from anything. A reimbursement typically happens when you pay for something upfront and are given the funds for the purchase later, such as with an employer or family member. You might also receive a reimbursement if you overpaid for something (like your escrow account for your mortgage) or if you purchased something and later decide to return it. No matter the situation, the trick is to treat the reimbursement like extra money rather than money you’ve previously spent. Often, a reimbursement comes noticeably later than the purchase. This means that the money has been out of your account for a while, and you’ve adjusted to not having it.

Because the money has already been “spent,” you can trick yourself into seeing the reimbursement as extra money. Instead of incorporating that extra money back into your budget, you can use it to make an extra payment on your most pressing debt. Over time, smaller reimbursements put toward paying off debt can add up to hundreds or even thousands of dollars of extra debt payments, all without spending your regular paycheck.

3. Cash Back

This one is very similar to reimbursements, except in this case, you won’t be receiving a dollar-for-dollar match. There are many options for earning cash back out there, from credit cards to online shopping platforms.

Note: If you have credit card debt or can’t be sure you can pay your cards off every month, avoid making purchases with credit cards. Any rewards you earn will be rendered mute by the interest you’ll pay.

These credit cards and online platforms will allow you to earn a percentage of your purchases back in cash, which does add up over time. 

Some of the best cashback credit cards to consider include the Chase Freedom, Chase Freedom Unlimited, Discover it Cash Back, Blue Cash Preferred Card from American Express, and the Capital One Quicksilver Cash Rewards card. Another popular option is the Costco card offered by Citi. 

Aside from cash back credit cards, you can earn cashback through online shopping sites like Rakuten (formerly Ebates) and Ibotta. The percentage of cash back you earn will depend on the card, category of purchase, or the company you’re purchasing from. If used regularly, cash back earning options can total hundreds or even thousands of dollars in cash back earned in a year for spending you’re already doing. Unlike reimbursements, cash back IS extra money coming into your pocket and can be put toward your debt without spending a penny from your paycheck.

4. Birthday/Holiday Money

Money received as a gift for your birthday/holidays is another great way to pay off debt without spending your paycheck. Even in modest amounts, money received as gifts serves as unexpected extra cash that doesn’t have to come out of your regular budget and can significantly cut down your debt. The danger is using these gifts to buy more things or to treat yourself in some way. While it’s appropriate to treat yourself occasionally, you’ll get far more bang for your buck by taking gift money and putting it toward getting yourself out of debt.

5. Overtime/Extra Pay

Yet another way to work toward paying off debt without spending your regular paycheck is to use any extra money earned through overtime or extra projects. This one may not apply to you if you’re ineligible for extra pay or have a variable income (although this could apply if you have a particularly lucrative month). Still, it could be a good way for those with a consistent income to put extra money toward debt.

It’ll also likely be harder to allocate this extra money toward debt because it’ll come as part of your regular paycheck and thus may not feel like extra money. However, when you’re trying to get out of debt, it’s imperative to avoid lifestyle inflation, even if it’s only for a month. Thus, if you want to use this money toward extra debt payments, it’ll be important to schedule those payments as soon as the money hits your account.

6. Selling Things

Decluttering has been all the rage over the last few years with KonMarie, but it’s also a great way to get extra money to put toward debt. And it’s never been easier to sell things of worth secondhand. Craigslist alternatives like Facebook Marketplace, Facebook groups, OfferUp, and other selling apps, along with good old Craigslist, make it easy to offer your unneeded items to others. Not only do you get rid of unneeded items and clear up space, but you can make a little extra money as well. The benefit will be threefold if you then turn around and use that extra cash to help pay off debt.

7. Side Hustles

American’s are side hustling more than ever before, especially with the rise of the gig economy and household debt. In fact, nearly half of American workers earn income outside of their primary job. Although many Americans are side-hustling because they have to pay bills, side hustles can also be a great way to quickly pay off debt without spending your regular paycheck. And the great thing about side hustles is that they are flexible and include anything from picking up a few shifts at a second job to selling your own products.

Side hustles can be something in your field or something you do as a hobby or for fun. You can also work at a side hustle for as much as you want and for as long as you want. The more you work and make, the quicker you’ll be able to pay off debt. Once you’re debt-free, you can either stop side hustling or reallocate that income into savings or fun things.

8. Pay Raises

While using money from a pay raise to pay off debt is technically spending your paycheck, it’s also extra money that you weren’t previously used to having. As with other sections of this article, the trick is to avoid lifestyle inflation. To use the extra money from a pay raise toward debt, it’s important to keep your budget and spending where it was BEFORE you started getting the raise. After all, you were likely making it just fine with the money you had before and are used to that level of spending. It will be important to automatically schedule extra payments with the extra money from your pay raise so that the money comes out of your account before you have an opportunity to spend it. Once you’ve paid off your debt, you can reallocate that money toward something else, which brings us to our last point.

9. Reallocate Payments for Paid Off Debt to Another Debt

If you’re like most American’s, you likely have multiple loans you’re trying to pay off. But what happens when you’ve paid one of them off? Our last tip for paying off debt without spending your paycheck is reallocating payments for a paid-off debt to another. For instance, let’s say you have monthly loan payments of $350 for a car and $200 for student loans. After years and lots of hard work, you’ve finally paid off your student loans. This means that you’ve now freed up $200 a month of money.

Now, you could take that extra money and buy something else, or you could take that money and put it toward your auto loan. You’re now paying $550 a month toward your loan and will pay it off much faster while saving interest. Whatever the situation, reallocating a monthly payment for a debt that’s been repaid to another debt is a great way to quickly knock out debt without spending extra money from your budget.

Moral of the Story

Most Americans have debt in one form or another. Many Americans have multiple debts, and some have more debts than assets. No matter where you fall, the quickest way to get out of debt is to put as much money as you can toward it, going above and beyond your required minimum payments.

While it can be hard to think about allocating more than the minimum toward your debt, we’ve outlined 9 ways that can help you pay off debt without spending your paycheck. These tips include one time or irregular extra money such as using tax returns, reimbursements, cashback, birthday/holiday money, overtime/extra pay, selling things, or side hustles, as well as regular extra money such as pay raises and reallocating payments from paid off debt to other debt.

No matter your situation, it’s likely that you’ll be able to use one or more of the methods we outlined to help you pay off debt quicker, saving your interest and increasing your financial flexibility. Hopefully, one day you’ll be debt free or at least have a more manageable debt load. At that time, you can begin to use this extra money toward saving, investing, and any other priorities you may have. Talk about Money Saved.

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