We all know it, and many of us live feeling burdened by it. This year, if you haven’t already done so, then join me in DOING SOMETHING ABOUT IT! Below are 5 important steps to take in 2015 to rid yourself of debt:
1. Know your debt. You can’t fight the monster that you can’t see. Add up EVERY LAST ONE of your debts, big and small. You’ve got to know what the big picture is. It can be extremely discouraging to see the total number, but use it as a motivator instead! It’s a wonderful thing to see the numbers go down, and a great way to keep you motivated, but you won’t see the progress without the starting number. If you are visually oriented, you can create a chart mapping out the total amount of debt, and/or a chart mapping the total amount of each individual debt. Don’t be afraid. You’ve got this! (You can see and download different charts here, here, or here.)
2. Track your expenses. Once you know your total numbers, it”s time to find out where all your money is going, so you can figure out where you can afford to make cuts. It’s generally recommended that you do this for an entire month, so you have a monthly picture. For me, it’s an ongoing process, and that’s what I’d personally recommend. Yes, track for a month so you can take the next few steps, but continue each month to track what you’re spending!
3. Create a budget – one that ELIMINATES credit card use! You can use free Budgeting Worksheets, or you can use software programs like Mint or YNAB. I personally use YNAB (You Need A Budget), and I love it. It feels more complete than a worksheet and it tracks EVERY PENNY, which is something I was never good about doing with a worksheet. To each his own though, do what works for you!
4. Add any extra $$ to one debt only. Pay the minimum on all your debt balances except for ONE, and on that one, pay every extra penny you can. There are different ways to go about this. You can pick the debt with the highest interest rate since it’s costing you the most per dollar, and get rid of it ASAP, or you can do like Dave Ramsey recommends and take out the smallest sized debt first, so that you are able to see successes sooner and keep motivated. It’s really a personal decision. And please, do NOT use the credit card/debt account to accumulate any new debt while you are doing this!
5. Keep at it! Never stop following these steps. When you are free from credit card debt, start paying off the car, or the medical bills, or the student loans, or the mortgage! Want to buy a big-ticket item? Use these steps to save up for it, and never allow yourself to get into debt again, if you can help it!!