5 Ways to Make Room in Your Budget to Pay Off Credit Card Debt

Credit card debt is a familiar burden to Americans. Nearly two-thirds of Americans are carrying credit card debt or have had it in the past, according to a new NerdWallet survey. And that debt isn’t cheap. Households that regularly carry credit card debt pay an average of about $1,300 a year in interest on that debt.

If you want to get out of debt fast – and who wouldn’t? – you need to free up more money in your budget to put toward your balances. Basic personal finance advice calls for canceling (or shrinking) your cable package and brown-bagging your lunches to save money. Those kinds of small changes are definitely a good start. However, the most effective way to make room in your budget is to focus on major elements of that budget: income, housing, transportation, education and medical costs.

1. Increase your income. To come up with more money to pay off debt, you can spend less or make more. A lot of the advice you see focuses only on the spending side, especially since many people doubt that they can squeeze more money out of their current job. But nothing says your day job is the only way to make more money.

If you’re an hourly employee, put in for overtime, if possible. If you’re salaried, pick up a second job on nights and weekends. Use your skills to make money on the side writing or designing, doing carpentry or odd jobs, house-sitting, pet-sitting or babysitting, tutoring or consulting – the list goes on. Sell your crafts, if it’s something people want. Or sell things taking up space in your home on Craigslist or eBay.

The point is that there are many ways to bring in extra cash to help pay off your credit card debt. Consider your skills and available time and brainstorm how to make extra money in a way that makes sense for you. After that, you can start thinking about how to cut costs.

2. Downsize your housing or get paid to host others. Housing is the largest expense in many budgets, and people tend to treat it as a fixed cost, or one that never changes. This doesn’t necessarily have to be the case. If you’re a renter, explore options for downsizing when your lease is up. If you’re a homeowner, consider whether you have more house than you need, and whether your interest rate is higher than market rates. A sale, or even just a refinance at a lower rate, could translate into hundreds in savings each month.

Another option: renting out a room in your house, either long term or through a short-term rental service like Airbnb. Check whether your city has any restrictions on room-sharing. It isn’t a legal option everywhere.

3. Get where you’re going cheaper. Vehicles have costs regardless of whether you’re driving them, but it’s significantly cheaper to drive your car less, so it’s worth minimizing your drive time. Save on gas, insurance and maintenance by ditching your car entirely to walk, take public transportation or bike – whatever is realistic for your lifestyle.

If you live in a large city where space comes at a premium and you don’t have a vehicle, you may even be able to rent out your parking space, if your home has one. Again, check your area’s restrictions.

4. Same education, lower costs. You can make schooling cheaper without lowering the quality of that education. If you, your spouse or a child is in school, look into scholarships and grants. It’s a common assumption that scholarships are only for the best students, but there are plenty of need-based scholarships available, too. Look for scholarships online and ask your school’s financial aid office about those offered directly by the school.

Each year, fill out the Free Application for Federal Student Aid, a form that determines whether you qualify for federal loans and grants and how much you qualify for. Federal student loans often have better terms than private loans, and grants don’t have to be repaid. Meanwhile, some merit-based scholarships require that you have filled out the FAFSA, even if you weren’t planning on applying for aid. Basic rule of thumb: Don’t turn down free money. It doesn’t come along that often.

5. Lower your medical costs without compromising your health. We don’t recommend bargain shopping for medical care. However, if your employer offers a flexible spending account or health savings account option, you can put money away to pay for health care tax-free. Keep in mind, though, that while HSA money can be rolled over from one year to the next, FSA funds are typically “use it or lose it” each year. Also, both accounts have maximum contribution limits.

If you incur medical expenses, try to avoid paying with a high-interest credit card. You may be able to set up a payment plan with your doctor’s or hospital’s billing department interest-free, so definitely ask. If you have the cash to pay for the majority of the balance, try to negotiate a discount for paying it off in a lump sum.

Credit card debt is costly, but by focusing on the large items in your budget, you can pay it off faster, saving yourself time and potentially a lot of money. Examine your budget to see what kinds of changes work best for you.