The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.
Are you current in debt?
Do you consistently make payments on your student loans? Your car? Your furniture? Does it ever just feel like all of your money that comes in just immediately goes out again? If you are sick and tired of this phenomenon, then it’s probably about time that you get out of debt. Fortunately for you, I have the five steps that will get you out of debt fast.
1) Commit
I once heard a simple riddle about two frogs that resonated with me;
“Two frogs are sitting on a lily pad. One decided to jump off. How many frogs are left on the lily pad?”
Well, the answer is one of course…or is it? Just because the frog decided that he was going to jump off does not mean that he actually jumped off from that lily pad. So, quite likely there are still two frogs left on that pad.
The same is true for many of us as well. We decide to do something, and we really mean it, but quite often that task just never gets accomplished. In order to get yourself out of debt, you are going to need to commit yourself to getting out 100%. This alone will not get you out of debt fast though. There are still four other steps!
2) Find a Friend
While there are some truly stubborn individuals that have escaped debt without partnering up with anyone else, it is definitely easier to trudge through this journey with a like-minded individual. This could be your friend, your parents, your brother or sister; anyone that has been talking about getting out of the debt mess they are in. It can be difficult to find someone that will truly commit, but at the very least it will help you get started on your debt free journey.
3) Lower Your Expenses
Alright, now that you are committed and most likely have an accountability partner, it’s time to reduce your expenses so that you actually have a few bucks at the end of the month to put toward all of those debts!
The best place to start is by looking at your last few months of expenses (this should be easy to find through your banking transactions) and then creating a list with two columns, “Wants” and “Needs”. A need is something like heat, food, clothing, and your house payment. A want (that you are already paying for) is something like cable TV, cell phone service, lawn mowing service, eating at restaurants, vacations, and $100 haircuts.
Now, just because an item is listed in the “want” category doesn’t mean that you have to get rid of it. That is up to you to decide.
In addition to the list, you should also circle the items that you believe are costing you more money than they should. For instance, a car might be a necessity for you, but you don’t really need that brand new leased car that is sitting in your driveway. You might be able to get away with an older model Honda that still gets the job done.
Do your best to remove the unnecessary expenses and reduce the necessary ones.
4) Increase Your Income
This is a biggie. Yes, reducing your expenses does help tremendously, but there is always a limit that you are going to reach where you just can’t possibly save any more money. With income though, the sky is the limit.
To increase your income, you could find a part-time job, ask for a raise, or you could start a business of your own on the side. I decided to start a side gig three years ago and have earned over $40,000 with it. I was able to pay off all of my consumer debt and am now working to pay off my home loan!
5) Reward Yourself Along the Way
Paying off debt can be quite exciting at first, but after a while, putting an extra $300 toward a $35,000 debt just loses its luster. Sometimes it seems like your debt will never go away! In order to keep your hopes up and to remind yourself that you are making progress, it is important to set up little goals (with rewards) along the way.
When I was first starting to pay off my debts, I really wanted a Detroit Tigers baseball cap (the nice fitted ones, not the dufey looking ones with the strap) so I built it into my goals. I had $20,000 worth of debt and I told myself that if I would get this debt down to $18,000 by a certain date, then I would buy myself that hat! Well, long story short, I hit the goal and still have the hat today. It rejuvenated my spirits and made me want to keep paying down that debt to the next goal!
How about you all? Are you ready to pay off your debt fast?
Share your experiences by commenting below!
***Photo courtesy of http://upload.wikimedia.org/wikipedia/commons/c/c2/Running_Dachshund_at_the_beach.jpg
