How to Aggressively Pay Off Debt When You’re Self-Employed

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I used to be in a lot of debt and had extremely erratic income and tons of surprise expenses. It was not pretty! If you’re facing a similar situation, or trying to make progress on your financial goals, what’s certain is that you are the only one who can make financial stability happen. Here’s how to reverse the momentum and start aggressively paying off debt when self-employed.

The benefits of being self-employed are extremely appealing. They include freedom, flexibility and the potential for unlimited income.

But one thing most people don’t talk about is how much of a roller coaster being a freelancer can be for your bank account and financial goals.

When I became self-employed over two years ago, I thought I was in a good place financially. I had paid off all my debt and saved up nearly $8,000 in a bank account for freelancing ventures.

(I planned to save up $10,000 but had to move across the country unexpected to help my mother-in-law with cancer treatment.)

Little did I know that being self-employed was totally different than receiving a regular paycheck and within a year I was over $12,000 in debt again.

How did this happen?! And what do I do now?

In the beginning stages of being my own boss, I made significant investments into my business, hired team members, and took time off for family needs.

I also had extremely erratic income and tons of surprise expenses. It was not pretty!

If you’re facing a similar situation, or trying to make progress on your financial goals, what’s certain is that you have to put in the time and effort to make financial stability happen.

Here’s how to reverse the momentum and start aggressively paying off your debts — even without a regular paycheck.

1. Stop adding to the debt mountain

This step is actually one of the most overlooked pieces of advice. Many experts jump to advice about learning to budget or earning more money, as the first steps to paying off debt, but this isn’t the case.

If you want to make any progress with your debt, you have to stop adding to the balances and take back control of your spending.

Cut up your credit cards (or hide them in a hard to reach place) and vow to stop using loans and credit cards as extensions of your paycheck. Do whatever you have to stop adding on more debt.

Do you need to downsize? Sell stuff? Move to a new city to lower your overhead? Work more hours, or additional jobs?

Get into the mindset of doing what it takes to stop the debt momentum and reverse the process so you can start paying down those balances. It will take awhile to get into the habit of not using credit cards and loans, but be patient and don’t give up.

2. Go on a spending challenge

One of the most effective ways to pay off debt involves going on a short-term spending challenge.

I put my business on a 60-day Cash Only challenge where I only spent money if I had the cash or money in the bank account via a debit card. No credit cards or loans were allowed.

If something like my 60-day Challenge isn’t for you, here are other challenges you can join:

  • 7-Day No Spending Challenge – Much like my 60-Day Cash Only challenge, this one forces you to buy the essentials, like food and utility bills, but nothing else. Once you do it for a week you can extend it for a longer period of time.
  • A Spending Diet – With this challenge you give yourself a small spending allowance (that’s reasonable) and then don’t buy anything outside of your basic needs, for a specific period of time.
  • Year-Long Shopping Ban – You’re not allowed to buy any new clothes, books, or even take-out coffee with a shopping ban. If it’s not something you need to survive, you’re not allowed to buy it.

Once you complete one of these challenges it will be much easier to create a new budget that you’ll actually stick to (much like doing a cleanse before changing your eating or working out habits).

Plus, any money you save during the spending challenges can be allocated towards additional debt payments!

3. Learn to budget with irregular income

Don’t be naive about your finances. Being a freelancer forces you to think of your money and budget differently than someone who receives a paycheck each week.

It’s no secret that working with clients and running your own business is volatile for your bank account, and financial goals. So it’s time to change up your budget to work more successfully with irregular income.

If being self-employed is what you want to do, then you have to learn to budget with irregular income successfully. Download my free budget template, or use one of the other types of budgets to create a custom plan that works for your needs.

It will likely take 2-3 months for your income and expenses to level out and work within your new spending limits. Again, stick with it and know that at the end of this you will actually be able to spend within your means and have money left over in the bank.   

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4. Level out your income

Along with spending less and learning to budget better, another way to aggressively pay down your debt is by increasing your cash flow. Aim to level out the inconsistencies of self-employment income by applying simple cash flow strategies, like:

  • Getting paid faster – Offer a discount to clients who pay you within 10 days of receiving the invoice. Give them lots of options for paying your invoice with a credit card, or PayPal, or check. Use an automated or recurring invoicing system so you can spend less time on admin tasks.
  • Enforcing payment policies – Request that clients pay 50% of the project up-front. Enforce deadlines, and a late fee if you don’t receive payment within the allotted time. Don’t waste your time chasing down payments.
  • Upselling your services/raising your rates – It’s easier to get someone who’s already said “yes” to say “yes” again. Focus your efforts on current clients and upsell them on your services, or negotiate higher rates. What else can you offer that they need? (Maybe they don’t even realize they need it.)

Leveling out your income may also mean getting a part-time job in addition to your freelance work. Or signing up to work as an independent contractor for a recurring client.

Be open to doing anything that will help level out your income and create more consistent cash flow.

5. Laser-focus your financial goals

Once you learn to stick to a budget successfully, and get into the mode of having money left over each month, now’s the time to aggressively pay off your debt. Put any and all extra money towards your smallest debt balance, then continue until all your accounts are paid off.

Finding extra money shouldn’t be difficult now that you’ve stopped adding to your debt mountain, have “cleansed” your budget with a spending challenge, and have increased your income through any means possible.

Pause any other financial goals, retirement savings, and travel plans until you either pay off all your debt, or reach a significant milestone (like paying down $10,000). If you want to make real progress, you have to be laser-focused with your debt payoff efforts.

Like with any other goal, whether it’s financial or health related, it takes patience, dedication, and discipline to stay on track.

Think of this as a long-term change not a short-term solution!

Doing so will allow you to aggressively pay off your debt and find the financial freedom you’re looking for.

Are you paying off debt as a freelancer? What steps are you taking to overcome this financial challenge?


September is Self-Improvement month, so I’m partnering with H&R Block to help readers turn over a new financial leaf. To learn more about improving your financial situation and understanding tax tips, check out the Block Talk blog


  1. Kayla says:

    This is exactly what I needed to hear right now Carrie! I am in the process of raising rates with some of my clients and seeking higher paying work so I can pay off debt faster.

  2. Sarah says:

    Great advice!!! Debt is unfortunately one of those things that comes and goes. As long as you have a plan to pay it off, you’re doing great! Happy to be following along 🙂

  3. Marjie says:

    Well said, Carrie! I am in the process of developing my side hustle to 1) kill the debt; and 2) leave the corporate grind. Thank you!

  4. I loved this post, Carrie! Stopping the debt momentum can feel impossible, but there are ways to start getting it under control. We have stopped the momentum, but we are still working our tails off to get on top of that debt mountain.

    • Carrie says:

      Changing the direction of the momentum seems impossible. Even now it’s tough for me to get back on top of things since being out of debt. But I know I can do it!

  5. Alicia Rades says:

    Great post, Carrie! I’ve never taken out any sort of loan for my business, but then again I don’t have a ton of expenses. I do keep a “business” account where I put a percentage of my income into so that I have some money for things like software, marketing material, my website, etc.

    However, I am interested in paying off my student loan and mortgage debt within the next couple of years. I think it’s very possible, and the biggest contributing factor is simply that I don’t spend nearly as much as I make. (It helps that my husband makes a full-time wage, too.) My situation definitely isn’t practical for some, but I live in an area with a low cost of living, so that helps, too.

  6. Rachel says:

    Thank you for sharing the advice. I can imagine that freelancing is a great career, but paying off debt might seem like a difficult part of it. I’ll have to try some of these spending challenges out!

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