How To Get Out Of Debt For Good
However big your debt is, chances are you are not alone. The average debt for people age 35 and under is a staggering $67,400. This debt can often times be from over extending oneself through credit cards, new cars or personal loans.
For most millennials, a majority of our debt can be attributed to arguably the most expensive piece of paper we have yet to frame i.e. our student loans.
Debt can seem overwhelming, but these four simple steps to get out of debt help to make the process a bit less daunting.
Step 1: Find Out Your Why
There are plenty of reasons for getting into debt (nice vacations, keeping up appearances, medical debt, etc.). In fact, it is incredibly easy to fall into debt. I once got a credit card specifically for an upcoming trip I was planning to China.
The goal was to only spend $3k on my vacation. By the end of the year, my credit card statements showed that I had spent $12k. YIKES.
If you ask someone if they like having creditors and owing others, you will most likely get a resounding NO. Of course nobody likes being in debt. In fact, many people say that they want to get out of debt but many cannot answer the question as to “WHY?”
To be able to achieve a long term goal like debt freedom, you need to get crystal clear on your “WHY”.
For example, do you have dreams of buying a house? What about dreams of opening a restaurant or early retirement? Honestly think about how eliminating your debt can help you get one step closer to that goal.
Once you have your reasons listed, put these goals in a place that you can see it. Stick these goals on your fridge or by your desk – whatever will help remain at the forefront of your mind. The journey to debt freedom might take a few months or years depending on the level of debt you are starting with.
But, what is most important is that you start to tackle it.
Step 2: Figure Out Your Total Debt
In order to know where you are going, you have to know your starting point. Calculating your total debt gets you to that place. It can seem overwhelming at times, but figuring out your total debt number can put you in an empowered place.
Jog down all the outstanding debt you may have:
- Credit Cards
- Car Loans
- Student Loans
- Medical Bills
- Debt Owed to the IRS
- Personal Loans
You cannot make a good debt elimination plan without first understanding exactly how much you owe and who you owe. Once you have the final number, you can start to tackle the next step.
Step 3: Start Automating Your Life
Relying on willpower alone is a surefire way to fail at any goal. Human beings suck at willpower. This is a fact. The best way to stay out of your own way is to automate your life.
You have already made the decision that you want to get out of debt and that is a HUGE step.
Do not mentally tax your brain by having to make the ‘decision to save/invest’ each time you get paid.
Calculate an amount that will go towards each category (debt elimination, savings, etc) every month and automate it!
Step 4: Seek Accountability On Your Debt Free Journey
One of the important steps to get out of debt is to have a source of accountability. This support can come in many forms.
- Debt Elimination Stories. You can find positive debt elimination stories like this one at Clever Girl Finance and at Well Kept Wallet.
- Podcasts. There are many amazing podcasts out there that talk about the specifics such as debt elimination or saving for FIRE. Below are just examples of a few that have really helped countless others on their journey to debt freedom: His & Her Money, House Of FI, Paychecks and Balances.
- Find a community. That can be in the form of a Facebook community, debt tracker or friends and family. Having support and an outlet can make all of the difference when things get tough and you start to loose track of your goal.
- Little steps still take you forward. Track your progress via a debt thermometer, debt pay off materials or with a free app such as Mint or Personal Finance.
Start your journey with these four simple steps and take charge of your life. A debt free life can truly give you more choices and the ability to craft your life the way you want.