Zen HabitsThis guest post is by Leo Babauta of Zen Habits, one of my favorite blogs.

Most of the time, the standard advice about debt elimination is to pay it off incrementally, over a period of time. We’re advised to be patient, and to hold on tight until the day comes when we pay off our debt.

That’s good advice, and I endorse it — however, many people have trouble doing things gradually. For them, I suggest trying to do debt elimination in bursts.

I’m a gradual person myself, but there are times when long-term goals are difficult for me. I know how intimidating it is to see a huge debt burden staring down at you, and when you calculate how long it will take to pay it all off, you have two or three years ahead of you.

I also know that I work better in bursts. I have trouble with long-term projects, but I can cram out an article or a one-day assignment easily. If I break things down into chunks, I’m more likely to get it finished, especially if I can use a big burst of energy to complete it all at once.

That concept of productivity can be applied to debt, if that suits your style better. Here are a number of strategies for doing so — pick and choose the ones that apply to you.

  1. Taxes. This is an obvious one, but if you get your tax refund, drop it on your debt. This can often be $1,000-5,000 for a lot of people, so you can erase a goodly number of debts with a refund. Now, a strategy that will be controversial: increase your tax withholding deduction so that your tax refund each year is bigger. Yes, your money would be better invested in something that actually earns dividends, but remember, this plan is for people that have problems with saving and investing and paying off debt incrementally. If Uncle Sam is taking your money each paycheck, you can’t withdraw it until you get your refund.
  2. Bonuses. Get an annual bonus at work? Don’t spend a dime. Pay off debt.
  3. Gifts. This will sound tacky, but if you have a special occasion coming up where people would normally give you gifts, tell them that a gift isn’t necessary, but if they do give you a gift, you’d like a check to pay off debt instead. If your friends and family know that you’re trying to get out of debt, and you explain your plan, they will understand. If you’re not comfortable with this strategy, that’s OK — just put any money you do receive towards debt.
  4. Ebay. OK, now we get into the serious stuff. In the middle of your living room floor, start piling up all of your possessions that you don’t actually use. Exercise machines, extra computers or televisions or stereos or furniture, bread machine, juicer, extra clothes and shoes, books, CDs and DVDs, paintings, collectibles, decorative stuff, everything. Make a huge pile. Now put everything on Ebay and sell it all. If anything doesn’t sell, you can hold a garage sale or something. Now take all the cash you earned from selling your junk, and pay off debt. Then look around your house and feel awesome about the lack of clutter.
  5. Car. We’re getting more extreme now, but you can sell your second car and just live with one car, using the proceeds to pay off debt. If you need a second car, buy a second-hand, smaller car and use the difference between the selling price of your old car and the buying price of your new (used) car and pay your debt.
  6. Home. If you have equity in your home, sell it and rent or buy a smaller home. With all the stuff you sold on Ebay, you don’t need a big home anyway. Use the profit for debt reduction.
  7. Freelancing. If you can find an extra hour or two each day (wake early, work during lunch, or find some time after work when you would normally watch TV), you can do some freelance work on the side. If you get a recurring assignment — for example, I write an article for a publication every week — instead of having them pay you every 2 weeks or every month, have them wait until you’re owed $1,000 or more. Then use the big payoff for debt.
  8. Blog. If you have a blog, and you’re earning income from ads, go to your ad services (like Google or Yahoo or Amazon) and tell them you don’t want to be paid until your earnings reach $1,000. Then use those payments for debt. Don’t spend your blog earnings.
  9. Winnings. If you go to Vegas and win big, or win the state lottery, or clean up in your weekly poker game or bingo, put it all on debt. Of course, if you win the state lottery, you probably won’t be worrying about debt anymore, but hey … I’ve heard of rap stars blowing $30 mil and ending up in debt, so just be careful.
  10. Robbery. I don’t advocate a life of crime, but if you happen to rob a bank or a casino (hey, I just watched Ocean’s 13), be sure to allot at least 80% to debt.

Leo writes about simple productivity at Zen Habits. For more on debt reduction, productivity, simplicity, GTD and health, see his site or subscribe to his feed.

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