3 Easy Steps To Eliminate Your Debt Troubles

In our culture today, debt is normal. It is seen as a necessity to own the things that you want to own. Car loans, student loans, credit cards are seen as the only way to own these things that we want or need. In many circumstances, individuals think, “you only live once” or, “I work hard for my money.” as reasons to buy the latest and greatest, using debt.

The good news is, there is a better way. Speaking from experience, there is a better way to live than drowning in debt. But it takes a lifestyle change and new habits to achieve.

Step 1: Build a Budget.

At this point, if one of our posts does NOT mention being on a budget, I would be shocked. However, it doesn’t make it any less true or important. Getting out of debt starts first with a budget. You need to evaluate your income – expenses and see what is leftover. When building this first budget, you should start with the basics of what you are already spending. Once you have this done, you can then begin to evaluate and cut back. When planning to get out of debt, you need to ensure to “trim the fat” and remove any excess spending. For our household, that meant reducing our grocery, entertainment and spending money during the time we were paying off debt. We knew it would be a temporary change, with long-term rewards.

Once you trim the fat, it’s time to create a plan for tackling the debt.

Step 2: Plan your debt snowball.

The “debt snowball” is a term used in financial counseling. It refers to a payoff plan that “snowballs” monthly payments until all debt is paid off. You list all of your debts, in order from smallest to largest, and their minimum payments. In the first stage of the debt payoff, you apply the minimum payment of the first debt, plus anything extra allocated in your budget, to the first debt. Once the first debt is completely paid off, you take the chunk that was applied to the first debt and start applying it as principle payments to the second. This continues until you have a massive principle payment by the time you reach the largest debt.

For more about the debt snowball and how it works, check out these posts:

Debt Payoff Plan – As Quickly As Possible

Shorten Your Debt Payoff Timeline

Step 3: Attack your debt!

This step is crucial in your debt payoff journey. If you really want to be debt-free, you need to attack it with what Dave Ramsey calls “Gazelle Intensity”. He says this because of the way gazelles move when they are being chased by prey. It is the “run as your life depends on it” kind of intensity, that, when applied to debt can get you to achieve your goals in a faster timeframe. By attacking your debt, you can stay focused on your goals, and each step you take will bring you one step closer to that goal.

Final Tips

Getting out of debt can be a long journey. It’s important to keep in mind that you did not get into this mess overnight, and it will not change overnight. It takes time to get out of debt. What you are working on mostly is changing behaviors that led you into debt in the first place.

Secondly, commit to staying out of debt.  This means that through the process of paying off your debts, you should not acquire any new debt. Get rid of credit cards, don’t sign anything new or make any big purchases.

What is your best tip for getting out of debt? Or what are you most excited to try this year? Let us know in the comments below.