Congratulations! Since you have made it to this post, it is apparent that you are ready for the journey. The journey of digging your way out of debt! You are ready to make positive changes to your financial future and learn how to make your debt pay off journey successful!
You are ready to roll up your sleeves, be honest and fight for your freedom. Paying off your debt is going to take time, hard work, communication, and endurance. This is going to take grit. But you’ve got plenty of that!
Just think of the freedom you will have once you have kicked your bad spending to the curb and settled up your past. You will have such a bright future!
How to get out of debt – the 5 step plan to make your debt pay off journey successful!
This is a simple five-step plan designed to break paying off debt down to the important things – the real game changers. Sometimes you can get lost in all of the noise out there, but if at the end of the day you stick to the five items below, you will be out of debt in no time!
Step 1: Identify what you are going to gain by paying off your debt
Knowledge and empowerment are always the results of a question. Questions are always lead with a simple: who, what, when, where, and why. The motivator, the real game changer, is the question that taps into our feelings is the “why.”
It is your confidence in your “why” that gives you the conviction necessary to make your vision, your goal, your reality. Your “why” comforts your fears and moments of impatience. It nurtures your passion and ensures you are meeting or exceeding your goals.
Step 2: Write it down and track your spending
Commit to yourself and your “why”
The time has come for an up close and personal self-assessment of your finances; be patient with yourself and understand that this is a process. You are going to have to face your present financial state and develop goals that will help you along the way. You need to combine several short-term goals that will allow you to reach your long-term goal of being debt free.
Before you start reducing your debt, you have to know where you stand. Jot down the following:
- How much money do you have on hand?
Include all bank and investment accounts. If you earn interest on this money, jot that down too.
- How much money do you make a month?
Account for all monies coming into your home. Include paychecks, expected bonuses, imminent income tax return, child support, alimony, etc.
- How much money do you owe a month?
Identify all of your variable expenses, such as gas, electric, phone, cable and all fixed costs such as your rent or mortgage.
- How much is your total debt excluding your mortgage?
Inhale deep and take your time. You need a comprehensive list of all of your outstanding balances and what their effective interest rate is.
- How much do you spend a month on NEEDS?
Needs and wants generally cause the most conflict. A NEED is an item that you must have to survive. Food, fuel for your vehicles, medications, etc.
You will not meet your target goal of freedom if you don’t know where it is. Be brutally honest with yourself.
It will be stressful – It will be worth it!
Step 3: Create your budget and hold yourself accountable
The budget is the catalyst required to make you successful. A budget is your ticket to real freedom. When Rob and I began our journey to take control of our finances, the word budget seemed like our lives were going to boil down to clipping coupons, ramen noodle soup, and single-ply toilet paper.
It was when we started to implement the budget that we found our freedom. We became aware of the value of our dollar – the value of our time. Once we realized that we were exchanging our lives for a supersized meal, must have recommendations from Amazon, and monthly payments that were stealing our present and our future. Our budget became our lifeline. It highlights our hard work and puts every dollar into perspective.
Creating a budget is not as hard as you may imagine and we are here to help with our Comprehensive Guide To Creating A Budget.
Step 4: Do not give up
Well, that sounds like a given. If you give up, you will never meet your destination of freedom from consumer debt. The giving up that I am referring to is deprivation. If you deny yourself, you will hate your journey. You will resent every dollar not spent.
So often, we are encouraged to give up the things we enjoy to get out of debt. Negativity breeds negativity. Do not deprive yourself.
Acknowledge your frivolous habits, but if you enjoy what you are doing, do not eliminate it from your life. In the long-term, life-changing, full money makeover process, the only things that you will truly “give up” are the things that do not bring you joy. By giving up the things that do not completely fulfill you, you will have money to both pay off your debt and keep the things you love the most.
Rather than giving up, identify opportunities to increase your cash flow. Opportunities to grow your cash includes exchanging time for money with a side hustle or overtime, locating dollars spent on items not used, or simply being aware of where your dollar is going and eliminating any unnecessary expenditures.
Here are a few tips and tricks to help you Find Money: Pay Off Debt Fast | 11 Things We Did to Pay Off $50,000 6 Months
Step 5: Work your butt off, stay focused and communicate
Now is not the time to be a sissy la-la.
It is time to make a decision. The decision you make will change your life. Success depends on you keeping your eye on the prize.
You must work your budget and continue to challenge it; challenge yourself. Taking control of your finances is not a passive process.
You need to be engaged, ambitious, and focused. Remember that this is not about money. This is about you living your life. Knowing where you stand and where you want to be.
When Rob and I started this journey, we evaluated our monthly income and expenses. We then dug deep to see how much money we made and where we were spending our money.
We set a high-level goal of paying off our debt within a one-year time frame. Honestly, it felt pretty unrealistic, but it was that ambitious goal that made it a challenge that we knew would unite us. It became a game!
A game that we won in only six months.
What is your “why” for getting out of debt? Let us know in the comments section below!