How to Pay Down Debt: 10 Ways to Pay Off Debt Fast When Self-Employed

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Find out 10 ways for how to pay down debt fast when you're self-employed. Use these clever tips for paying down business debt as a freelancer and become debt free fast!

Figuring how to pay down debt you’ve accumulated as a freelance business owner is tough. On the one hand you know the money you spent was a business investment.

On the flip side, business debt is not good for cash flow and can cripple a small business. However, the benefits of being self-employed are undeniable and include 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 you 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.

I think most people can agree that it’s not ideal to quit your job and start a business if you have debt. Leaving your job to pursue your own thing is risky and being in debt elevates that risk.

You’re leaving behind a life of steady paychecks and false security for the unknown world of freelancing. But life is full of risks, and sometimes going your own way, even while in debt, makes sense. Initially, I started to see freelancing and side hustling as a great way to complement my income and help me pay off debt.

But as my freelance income grew, I felt like it was time to make a decision on where to spend my energy, and freelancing seemed like the right decision.

As I made the transition, debt felt like the biggest obstacle for me. Quitting your job and being in debt goes against every single piece of financial advice we’ve heard.

After fully grasping the weight of my decision, I realized that while risky, being a business owner would ultimately open up immeasurable opportunities for me. And that I had a real shot of earning more money than at a nonprofit, which was my field of work for the past eight years.

While not ideal, there are ways to prioritize your debt, while building a business.

Finally learn how to save money on a part-time income

2. Put a portion of income towards debt

The beauty of being freelance is being your own boss and making your own schedule. The downside is the lack of consistency when it comes to getting paid. I have clients that pay monthly, bi-monthly, or even up to eight weeks for some of the brand ambassador work I do.

Long gone are the days of getting paid every two weeks like clockwork. Now, I am carefully budgeting my income so it lasts until the next payment arrives.

At my day job, I knew exactly what I would make and when I would make it. A traditional job does make one thing easy, and that is budgeting. It can be hard to budget when your income fluctuates month to month.

When I had a full-time job, I would make a point to pay at least $1,000 a month to debt. Now as a freelancer, I realize that model doesn’t really work — at least not in the traditional monthly budgeting sense.

Instead, I am now putting a percentage of my freelance income to debt. As I continue my transition and grow my business, I’m keeping my percentage at a base of 30%. That means for every payment I receive, I take 30% off the top and put it to debt, in addition to the 30% I take out for taxes. If I have more left over at the end of the month, I’ll make additional payments.

Budgeting this way frees you up to consistently make payments, regardless of your income. So whether you make $2,000 or $8,000 in a month, you’re still putting a portion of your income towards debt.

So how do you come up with a percentage that works for you?

  • Look at the past few months of income – What is your average income?
  • Create a bare bones budget – A bare bones budget only includes what you need to get by. What amount of money do you need to make to ensure you eat and pay rent? Write that number down.
  • Leverage discretionary spending – Hopefully, there will be a gap between your average income and your bare bones budget. That gap is considered your discretionary income, and should be used for paying off debt as well as celebrating big wins.
  • Carefully look at your budget – How much wiggle room do you have? How much do you want to put towards debt each month? (this is important as it forces me to hustle harder to achieve my goals).
  • Come up with a percentage you are comfortable with, that leaves enough room for paying your necessities and your taxes. Make sure it’s a percentage that is working for you and helps you sleep best at night. Paying off too much or too little can backfire, so make sure you are paying off debt at a pace that works to support your business and well-being.

reduce monthly bills

3. Use tools to track your debt

There are more resources than ever to help you pay off your debt, manage your finances, and keep a budget.

A tool that I just started using to track my debt is the Personal Capital app. It’s a web and mobile app that puts all of your balances in one place, helps you find tax savings and includes tips so you can pay off debt fast.

If you have student loans, try refinancing them with SoFi. This is a financial startup aimed at helping people become debt free faster. In fact, you can check what your new rate will be without effecting your credit score.

In addition to debt tracking and management tools, it’s key to monitor your budget as well. You can use resources like or do it low-tech with a plain old excel spreadsheet.

Whatever your method is, it’s important to see the numbers right in front of you. Sometimes looking at that number can be overwhelming and nauseating — it can be a hard truth to swallow. But it’s a temporary reality that will shift, if you put in the effort now.

Related: Track your debt balances using Personal Capital’s free software.

4. 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!

5. Reduce monthly bills with BillFixers

A large part of learning how to pay down debt relates to controlling your spending. As mentioned, going on a spending challenge is a great way to get back on track with your budget. But it’s also important to negotiate your monthly bills so you can get a reduced rate.

One way I’ve done this is to work with a company like BillFixers who negotiates your monthly bills on your behalf. Just give them access to a specific bill, such as your AT&T or internet bill and they will get you the best price possible.

In fact, they saved me over $365 a year on just two of my bills. Click here to read more about how to save money on bills with BillFixers.

billfixers review

6. 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.   

7. 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.

How to make money on the side of your day job without losing your mind!

8. Set up targeted savings accounts

As a freelancer in debt, you’re trying to get out of debt, not stay in debt or acquire more, right?

In order to do this, focus on building your emergency fund first. I have made a conscious decision to lower some of my student loan payments, while I build up my emergency fund to a stronger level.

Ideally, having three to six months of expenses should be sufficient, but I know that a year’s worth of expenses for a freelancer is much better. A year of expenses is quite a lot of money — so don’t get overwhelmed with building it up, just take baby steps.

Start with even $10 a week.

In addition to your emergency fund, set up targeted savings accounts so you are actively saving for business expenses and other priorities. Myself, and the team of Careful Cents, uses Capital One Spark Business and have savings accounts for our emergency funds, taxes and travel.

I put a small amount into each every month. By creating and naming your targeted savings account, you are subtly stating your money goals and letting each dollar work for your priorities.

You can plan ahead and create a targeted, separate savings account now to get started on your goals, big or small. Start a laptop fund, a moving fund, website redesign fund, etc.

The key is to make this money separate from a standard savings account. When all your money is lumped together, it’s too easy to spend it — with a separate account, with its own special name, there will be no doubt what purpose that money serves.

Related: Find out the 5 best online savings accounts to stash your cash.

9. 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.

How to budget with irregular income

10. Pay less interest and fees

The hardest part about paying down business debt is having to pay high interest rates and fees on your balances. The good news though is that if you have a good credit score, you can consolidate your debts into a better loan.

One way to do this is by applying for a personal loan from SoFi and consolidated all of your outstanding credit cards to this one loan. This will help reduce your high credit card interest rates and streamline your monthly payments.

You’ll have less headache trying to pay multiple debts and save money on interest rates and fees every month. Now you can pay off debt fast!

Related: Refinance your debts with a lower interest rate thanks to SoFi.

Paying off debt when self-employed

As I mentioned, paying off debt as a self-employed freelancer isn’t ideal, but there are ways to make it easier. As a freelancer, you are likely hard working, creative and a go-getter — all qualities that will help you passionately fight off debt and run an awesome business.

Just think, by paying off debt, you are actively investing in your own future as well as the future of your business.

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. 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!

  4. 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.

  5. 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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