I Paid Off $45,000 In Debt While Raising My Credit Score And I Owe It To This One Money Habit

Ashley Rose

A budget is all about prioritizing your money so that you can reach your financial goalsYou put your money where you want it to go to further your goals. If you want to pay off debt, you put your extra money toward paying off debt. It’s really that simple. 

It’s thanks to this money habit that I ended up paying off $45,000 of debt. Here’s everything this one money habit will help you achieve.

1. Stop being late on payments

Once you have a budget, you will stop paying your bills late, which will help your credit score drastically. A budget will help you keep track of your bills and due dates so you can stop being late for good. 

When you are more organized and know what bill to pay out of each paycheck, you can and will be on time. Not only will this lower your stress level, but it will have a ripple effect on your finances. 

2. Start paying in cash to stay on track

When you start budgeting and paying cash for things, you’ll find that you can quit using debt to pay for things. Contrary to popular belief, you do not have to keep using credit to build your credit. 

You can even open a credit card and not use it at all to increase your score. Remember: You do not have to carry a balance to increase your credit score, and if cash helps you stay on tack with your budget, don’t be afraid to pay for things that way.

3. Never just pay the minimum amount 

I had $45,000 in debt and was able to pay it off in 17 months. It all started with a budget. Now, I am debt free except for my mortgage and my credit score is as high as you can get.

When you have too much debt, it actually hurts your score, even if you are making payments on time every month. You want to lower your debt to increase your score. Making more than the minimum payment every month will help you increase your score and become debt-free, so do whatever you can to make this happen.

4. Stop living paycheck to paycheck

You are no longer living paycheck to paycheck when you are ahead on your bills and have money in savings. If you can get through even one or two paycheck cycles without dipping into your last paycheck, you are doing better than 80% of Americans.

A budget will help you get there. It will help lower your stress level and improve your life overall. It’s when you get out of the vicious cycle of living paycheck to paycheck, too, that you will be able to start climbing out of debt.

5. Start a sinking fund

Saving money for emergencies and the unexpected things life throws your way will help you not have to use debt to pay normal expenses. It turns an emergency into a minor inconvenience. A lot of “emergencies” can be paid for with what I call a “sinking” fund. A sinking fund is just a savings account for certain expenses, and it’s a helpful way to budget.

A sinking fund includes: vehicle maintenance, house maintenance, property taxes, Christmas, gifts, birthdays, and everything else that really should be planned for in your budget. An emergency is something that you haven’t planned for. Most things that people call emergencies can be and should be planned for in a budget.

There are some things that are true emergencies, but if you have planned and saved in your budget, those emergencies are easier to handle and get through financially.

Final thoughts

A budget is the foundation for your finances. Once you have your budget set and start sticking to it, everything else will start to improve. It may take some time to increase your credit score but it will go up relative quickly if you stop using debt, start paying off debt and you’re paying your bills on time.

Ashley Rose is the creator of Budgets Made Easy. She was able to pay off $45,000 in debt in 17 months. Now she helps people budget their money so they can pay off their debts as fast as possible. You can follow her on Facebook.

Feature Image: Twenty20

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