Being debt free has been more amazing than I thought, and I want others to be able to share in a similar joy. For those who are trying to get out of debt or entertaining the thought, here is some ammunition. As my wife and I and slowly hacked our way out of $70,000 in debt, there were a few key strategies that were extremely helpful:
1. Find Your Passion – Finding your passion is my number tip for anything that requires a large amount of energy and commitment. I started thinking about being debt free, because I realized that I wanted more in life. I wanted freedom to change careers, financial freedom for my family and children(and for their children), security for my family, freedom to pursue my dreams, and to be able to give abundantly. Those are the types of things that get my juices flowing, and the real goals that propelled me to being debt free. What are the things that resonate with you and how does being debt free help you achieve them? Figure that out, and you will be able to harness a powerful motivating force and a set yourself up for some strong endurance.
2. Change Your Behavior – If you are like me, you were in debt because your beliefs and actions towards money got you there. Becoming debt free will require you to change those behaviors and belief structures. Cut up or cancel those credit cards, change how you handle stress or depression, cancel the cable, cut down on your golf, change your ideas on how many toys your kids need. These are the types of things that will heal the financial bleeding. I mention this mainly because people can get caught up in the math of getting out of debt and lose sight of actually changing their behavior. Debt is a behavior problem, not a math problem. We need to stop spending money we don’t have; you won’t get out of debt unless you do.
3. Simplify and Focus – This one is paramount for changing you behavior. Just like multi-tasking isn’t the most efficient way to get things done, spreading yourself/money thin doesn’t work for getting out of debt either. Use your passion to develop a plan that divides your debt up into small steps, and conquer them one at a time. We had $70,000 in debt, so this step was extremely important. $70,000 in debt is a mountain, but we chose to focus on climbing several mole hills.
We focused all of our extra money on debt. And when I say ALL, I mean all. We stopped our monthly savings, 401K, everything. We usually focused the extra money on the smallest debt, unless a higher interest debt made more sense. The reason we started with the smallest debt, was for focus. Each debt you eliminate helps you focus more on the next. Just as the focus on small conquerable pieces gives you more energy and encourages the ever elusive change in behavior.
4. Believe You Can Do It – If you can believe that you will be debt free, you will probably make it. But for those of us who lack self-confidence or have a mountain of debt, dividing the overwhelming task into small manageable tasks helps to breed confidence. With each victory, you can begin to picture yourself debt free. Picturing yourself debt free gets you closer to passion and breeds more energy which creates better focus. Creating such a positive cycle will only help to increase your results.
5. Have An Emergency Fund – Before you start paying down your debt, save a small cushion that shields you from the ups and downs of everyday life. One financial expert, Dave Ramsey, suggests $1,000, and this is a reasonable number. I know that we dipped into the emergency fund a couple times over the three and a half years it took to get out of debt. Things like unexpected car repairs that might have gone on your credit card can come from the emergency fund. The emergency serves as your shield so that you can stay focused.
For those of you in debt, I hope that these tips are helpful. I know they helped me. For those of you feeling beat down: step back, regroup, and come out with your guns blazing. If you need some support, feel free to drop me an email.