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At times, the task of how to get out of debt seems overwhelming and maybe impossible.
Debt feels like drowning in quick sand.
Even though we have been debt free for a couple of years now, I remember our debt (like it was yesterday). It was like a looming cloud over us. We were paying a good chunk of money each month towards our debt, but it seemed like progress was very slow.
There just wasn't enough cash flow in our monthly budget.
Until, we decided to pay off debt and pay it off FAST! Fast forward, we paid off $53,000 in student loan debt in one year. Gone!
Are you in the same position as we were? Ready to pay off your debt? Not sure where to start?
I bet there is one similar theme…you are ready to move on from your debt and live your life.
Debt is seriously the CASH FLOW KILLER!
What is Cash Flow?
Cash flow is the ability to have money when needed to cover bills and expenses.
Income coming in. Money going out to pay bills.
The term is typically used in the business word, but it completely applies to personal finances.
For us, we had over $500 each and every month paying off our debt with no end date in sight. Almost $6,000 a year of our cash flow tied up in paying off debt! That is enough for a Disney vacation or an amazing beach getaway!
By changing your cash flow situation, it immediately starts to change your personal finance situation.
Downfall of Debt
In today's society, debt is considered normal.
Many people justify debt into good debt and bad debt. At the end of the day, debt is still debt. You are obligated to pay money for something you couldn't pay cash for in the first place.
The current statistics show Americans owe $13.5 Trillion dollars in household debt. Credit cards, auto loans, student loans, and mortgages. That is a huge number, which most people cannot wrap their head around.
The access to debt is so easy and quick that people may not realize the slippery slope of a debt trap they just entered.
The tricky part for you is going against the grain and saying no to NO MORE DEBT!
How to Get Out of Debt:
Are you ready to learn how to pay off debt? Live debt free!
If so, let's go!
1. Start a War on your Debt
To truly get rid of your debt, you have to be ready to tackle it full on. Head first.
I hated our debt. I got mad. That was the turning point for us.
I reached a point that I was done with our debt and wanted to move on in our life. Read more about our story of why we become debt free.
Start a war on your debt. Be mad. Be ready for a change. And be prepared to make a change.
Remember, that paying off your debt will happen with consistency and perseverance. It will take time. It will take patience.
Also, it will be hard at times. You will have to say no to yourself, to your spouse, to your kids, to your extended family, to your friends. Saying no will be hard at times.
Stay focused on the long term. The day will come when your debt will be paid off and you get to say yes!
If you are ready to start a war on your debt, continue reading the remaining steps. Make sure to announce a change on Facebook or Instagram.
If you are not ready to make a change, then pin this for later and revisit it when you are ready to get mad and truly make a change on your debt situation.
2. Stop Using Debt Methods to Pay
Now, that you started a war on your debt you are prepared to tackle your debt head on.
To move forward, you must stop adding to the total debt owed. You can't continue to pay Peter with Paul.
This is such an important step to pay off debt!
Adding additional debt will completely derail your journey of paying off debt.
Just to stress this point, it is absolutely impossible to continue with the steps to pay off debt if you cannot stop using debt as a payment method.
Remember the saying…two steps forward and one step back. Continuing to use debt is the same way.
– Student Loan Debt –
At this point, your student loan is what it is. You can't change the amount. However, if you haven't consolidated your loans, I highly recommend consolidating your loans to a smaller interest rate.
When we initially consolidated our student loans, we dropped our interest rate by over 5%! Thus, saving us THOUSANDS of dollars! Also, most servicers offer an interest rate decrease by adding automatic payments.
For a fully understanding, read the Ultimate Guide On How To Refinance Student Loans.
– Auto Loan –
The cost of an auto loan is outrageous! The average price of a new car is $34,000 with an average interest rate of 4.21%. That new car will end up costing you $37,763 and within 5 years that same car will depreciate about 50%! And you just wasted $14,000 and that asset gave you a negative rate of return.
That is why most people are upside down in their car loan.
Look into the possibility of selling the car with the loan and get something that you can afford without a car loan.
It will probably be a couple of years older with more miles. But, there is beauty in driving a car that you own free and clear! Plus you start with a clean, fresh slate.
If that isn't an option, look at transferring your car loan to a credit union with a lower interest rate.
– Credit Card Debt –
Stop using the credit card immediately. Call and cancel any automatic charges (if necessary, switch them to your debit card).
This will be the hardest debt position to change.
You have to find ways to cut your spending, sell anything you can; then, you can start living on what money is coming in – not what money hasn't been earned.
You need to stay motivated! It is possible to get out of credit card debt and stay out!
If the interest rates on your credit cards are eating you alive, then the last resort is to look into debt consolidation or transfer the balances to a 0% interest rate to slow down the burn. Start a Debt Relief Application now.
Must Read: The Ultimate Guide to a Frugal Lifestyle
3. Get Your Finances in Line
One of the biggest mistakes when paying off debt is not starting on a solid foundation.
For a full understanding, this is a must read – Money Bliss Steps to Financial Freedom!
Success happens when a things are build on a strong foundation. That way one circumstance won't knock you off your feet right back where you started.
It is necessary to organize your personal finances, so you know what you are dealing with.
Next, you must have a fully funded emergency fund before starting to get out of debt.
We already determined that debt is like quick sand. So, be prepared and get your finances in line first.
Food for Thought – 7 Things to Give UP to Pay Off Debt Faster
4. Create a Pay Off Debt Plan
Now, to the best question… How to pay off debt?
It is time to figure out a debt payment plan.
How do you anticipate paying extra money to get out of debt faster?
- Are you going to lower the grocery budget?
- Live a frugal lifestyle?
- Find motivation from one of the best selling books on debt?
- Actually agree to learn how to budget money?
- Use these 10 money tips to find success?
Your pay off debt plan needs to hold you accountable on how money is spent each and every month. Remember, the goal is to become debt free! Then, you can live differently than most people.
When paying off debt, there are a couple different ways to pay off debt – debt snowball or debt avalanche.
With a debt snowball, the smallest debt is paid off first and then snowballed into the remaining debts. With debt avalanche (also referred to as debt stacking), the largest interest rate is paid off first and working through to the smallest interest rate.
Which is the best method for you? Honestly, it depends on your personality (and spouse's, if applicable). This is a great tool to figure out which method is best to pay off debt.
Plus see how finding extra money can completely change your pay off debt plan!
Related Post: How to Pay off Debt – Which Method is Best for You
5. Stay Motivated with a Pay Off Date
Motivation is key to the ultimate success with debt.
I will be honest. There were times during our paying off journey that I was down living a frugal lifestyle and constantly say no to things.
However, I knew that with persistence and perseverance we would be debt free by a certain date.
Then, we would be celebrating with a family beach vacation (paid in cash, of course).
Figure out your pay off debt with this free tool.
Related Read: Are You Making One of these Common Debt Payoff Mistakes?
Bonus Tips on How to Get Out of Debt Quickly
Too many times, I hear “when I make more money” followed by (fill-in-the-blank).
Honestly, in the end, it is easier to trim spending than make more money.
So, don't let debt continue to rule your life!
Questions to Consider When Paying Off Debt:
- Extra savings that can be used to pay off debt?
- Is it possible to add additional income or a second job to pay off debt? Jump Into the Side-Gig Biz
- Is it possible to curb spending to allow for additional money to go to debt? Ideal Household Budget Percentages
- Do you have any foreseeable circumstances that may change your circumstances (i.e. birth of a child, move)? How to Transition from Two Incomes to One
- Are you ready to start a frugal lifestyle? Learn more about The Ultimate Guide to a Frugal Lifestyle.
- What do you need to do to stay motivated? Pay Off Debt Faster
Related Post: Best Debt Apps To Payoff DEBT
Learn Tips & Tricks from Others
Knowledge is power!
Many people document their stories on they paid off debt. Learn tips and tricks so you don't make the same mistakes.
Just be wary on all the stories… Not everyone may want to divulge the good, bad, and ugly while paying off debt.
Also, make sure you aren't making on of these common debt mistakes!
Did you Learn How to Get out of Debt ?
There are your 5 steps on how to pay off debt!
Are you ready to commit to becoming debt free?
It worked for us and it will work for you! The road will be bumpy at times, but, believe me, the view at the end is incredible.
LIVE LIFE DEBT FREE!
Learn the Money Bliss Steps to Financial Freedom.
Comment below on how you plan to pay off debt and anticipate being debt free.
Not sure where to start? Sign up for the Free Jumpstart Your Money Mindset program!