Hello again! I write this blog with the intent to help someone (anyone??) who may be struggling with getting out of debt. Unfortunately, there is no magic pill or easy fix to get out of debt (unless, of course you won the Mega Millions!). But for the rest of us, it takes time, patience, and a plan to get out of debt. From learning from some of the best financial advisors, to speaking with people and hearing their stories (including my own) I’ve come up with 10 effective steps to get out of debt.
- Be Fed Up with Debt! I’ve learned that in order to make a lasting change you have to have a different mindset. This mindset doesn’t come until you’ve said to yourself, “I’ve HAD IT!” Have you ever heard the phrase “sick and tired of being sick and tired”? Well, that’s pretty much how you should feel towards your debt.
- Know how much debt you have. Know your number. Add up EVERYTHING! Go through your credit report to see if there are old debts that you may not remember. It’s time for financial spring cleaning!!!
- Create a Debt Pay Off Plan and Make it Your Own. At this point you need to create a financial plan that is unique to your financial needs. I really like the Dave Ramsey debt snowball where you pay the smallest debt first and work your way up to the largest debt. Some may want to pay off the highest interest first. Know WHY you want to get out of debt and really make this plan your own.
- Get on a Budget. For some reason the word “budget” is almost like a four letter word to most. They hear “budget” and run the other direction. Hey, let’s not make it more difficult than it needs to be! A budget is simply a plan on how you will spend your income. This works well with step 2 creating a pay off plan because you will work you debt payoff in your budget. Set a goal and stick to it. If you have $10,000 in debt and you want to be out of debt in 10 months that means you will need to put $1,000 towards your debt each month to achieve the goal. Work it in the budget.
- Find ways to cut expenses. I wrote a blog about how the small expenses can really add up! Go through your budget and see if there are expenses you can cut or get rid of all together. Start thinking about things like the extra cable service, extra phone line, or the weekly manicure/pedicure (maybe get them every other week instead).
- Don’t worry about what others are doing. The “others” are broke. I know you’ve heard of the Jones family where everyone wants to keep up with the Joneses. Who cares if people think you’re “cheap”. Sometimes you need to make the sacrifice to win. This is something I work on often with my own finances. Living in a world that thrives on the hottest gadgets, trendiest clothes, and “get it now, pay later” mentality, makes this step a little difficult at times. Trust me, it’ll pay off in the end!
- Have small victory celebrations at certain intervals. I think it’s VERY important that you have points (say the half way mark) that you can look forward to. The journey won’t seem so long and drawn out. Remember to make it small though. 10 day cruise is out of the question!
- Don’t go back in Debt. I’m sure you already know this but it’s important enough to repeat. If you’re working hard to get out of debt, don’t shoot yourself in the foot and get back in debt! Stay on the budget. Keep the eye on the prize!!!
- Let your Family and Friends know what you’re up to. I think this is an important step because you can gain a lot of support from this group of people. Hopefully they will be understanding and know why you have to say no to going out to dinner or having the happy hour on Friday. And maybe you will inspire them to get out of debt themselves.
- Don’t you DARE give up! This is not going to be easy! If it were easy nobody would be in debt! Keep in mind step 3 and remember WHY you want to get out of debt and keep your eye on the prize. You can do this!!!!
Now I would LOVE to hear some of your great ideas on getting out debt!