Before learning about how to get rid of debt, it’s important to be aware of what got you into debt in the first place. Taking into account of how you got into debt can help ensure that it doesn’t happen again.
Your debt like accumulated from spending money, whether necessary or not, on items, services or experiences which you could not afford and so you landed up borrowing money. Doing this on a consistent basis, resulted in significant debt and likely wondering NOW WHAT, how do I get rid of debt?
Here are my seven steps to getting out of debt:
- Commit! You have to decide and declare that you are willing to do whatever it takes to getting yourself out of debt. Before you begin to tackle this problem you have to decide within yourself that you’re actually going to take the necessary steps, which is not an easy thing to follow through with.
- Determine how much debt you have, how much you owe and what interest rates you are paying! It’s important that you know how many different lines of credit, credit cards and people you owe money to. You also have to look into what kind of interest rate you are paying for each of them. Some debt has a higher borrowing cost.
- Create a plan! Decide which parts of your debt you will be paying off first. I recommend starting with those lines of credit or credit products where you owe the most interest because it is costing you more to sustain that debt.
- Cut your expenses & create a budget! It is necessary for you to this in order to clean up your finances and get into a place where you could start to build and accelerate your wealth. While you may feel that all of your expenses are necessities, you have to distinguish between what you “want” and what you “need”. To better understand the difference, watch my video on Living Within Your Means, I explain it in details. Making a detailed budget will help you to scale back on some of those luxuries. At this time of committing to get rid of your debt, you need to cut back your spending. The more money you can dedicate to paying off your debt, the faster you can pay it off.
- Make more money! I know you’re thinking… I already have a job! If you want to get rid of your debt and you decided in step one that you were going to commit to making this happen, now is the time to continue with that hustling and make it happen. You can take on another part time job or generate a new stream of income. Some ideas include dog-sitting, babysitting, online surveys or focus groups. There are so many avenues to earn a little extra money that you can do if you’re willing to put in the effort. Don’t think that another stream of income or another part time job is beneath you. While you are already cutting some expenses, the way to really get ahead is to make some extra income, and take that extra money and allocate it directly towards paying off your debt.
- Surround yourself with other positive people! It is important to spend time with people who have good financial habits. If your close friends invite you to go shopping at the mall, or to go out for fancy dinners, it’s time to decline. Let your friends know that you’re looking to focus on your budgeting and suggest alternate activities that are either low cost or free. There are so many free activities or low-cost activities which are fun and a great way to spend quality time together, like pot-luck dinners and movie nights. I’m sure you and your friends can come up with tons of other creative ideas. You might even find that some of your friends would be grateful to save a little money too.
- Celebrate the milestones! You might have a ton of debt whether it’s student debt or consumer debt, and it may actually take you a while to get rid of your debt so if you’re going to be cutting your expenses and working really hard make sure that you celebrate along the way. Acknowledge the little milestones… whether it’s every time you pay off five hundred dollars or a thousand dollars or if it’s a percentage of your debt that you’ve been able to get rid of, make sure that you celebrate.
Remember, you don’t get rid of debt by accident; it takes commitment and careful planning to become debt free!