Unfortunately, way too many people carry debt each month. For the sake of simplicity, we won’t be addressing mortgage debt (step 5 addresses housing & mortgages). The debt we’re talking about is all high interest debt. This might be a credit card balance, a high interest auto loan, or whatever. The point is that your debt is delaying your financial freedom. Until you get out of debt, you can’t get to the next steps and you can’t climb the ladder to financial freedom.
It May Seem Impossible
The first thing that I want to remind you is that while your debt load may seem insurmountable, it’s not. No matter how much debt you have, I guarantee you that somebody has had more debt and successfully paid it off and become debt free.
With a quality plan and a willingness to make the necessary changes, you can and will pay off your debt.
Why Debt Is So Bad
The biggest problem with debt is that it tends to be a massive anchor holding you down as you attempt to progress forward financially. Often times, people let a large debt balance hang over them for years, preventing them from making any financial progress such as saving and investing.
Interestingly, it’s actually much harder to pay off a balance such as $10,000 than it is to save the equivalent amount. The reason is because while you are accumulating that sum of money, you’re also paying finance charges and interest payments. Thus, you are forced to actually save much more than the balance.
While you’re in debt, you are somebody else’s asset. You’re paying somebody else a return. Financial freedom is all about flipping this equation so that you are the one who owns assets and you are the one earning a return.
The Best Approach
The most popular “get out of debt” plan seems to be the Dave Ramsey debt “snowball” approach which says to pay off the smaller debts first and then move on to the next largest debt. The snowball effect or momentum you start to build by paying off debt balance after debt balance will help you keep going and eventually complete the process.
I like to talk about getting extreme when it comes to paying off debt. Depending on your circumstances, you may want to consider going to great lengths to cut back you spending so much that you’re left with significant amounts of money to allocate towards debt repayment. Consider moving in with a friend or family member temporarily in order to reduce housing expenses by 90% or more, consider eating very, very cheap (rice & beans) for a while, consider getting rid of all convenient luxuries that we’ve become accustomed to such as television and maybe even your cell phone. In a jam and need fast cash? Safe Cash Loans Online from MyPaydayLoanCash.com can help out in any emergency.
Lastly, get rid of your credit card until you’re debt free. I would recommend freezing all spending on credit until you’re debt free. A cash basis is a good idea. Perhaps, even consider an “envelope system” where you budget a set amount of cash for the various areas of your life. We will get into further details regarding money management in the next step.
Jump To Another Step In This Guide:
- Step 1 – Assess Your Situation & Set Some Goals
- Step 2 – Get Out Of Debt
- Step 3 – Smart Money Management
- Step 4 – Boost and Diversify Your Income
- Step 5 – Reduce Housing Expenses
- Step 6 – Make Your Money Work For You
- Step 7 – Protect Against Inflation
- Step 8 – Invest In Cash Flowing Assets
- Step 9 – Pursue Complete Independence
- Step 10 – Make Incremental Improvements
