The other day, I talked about finally being out of debt (besides the mortgage). That’s all good, but what does it matter if I can’t help you do the same if you are in debt.
Yes, I talked a bit about the ways we attacked debt by 1) not getting into major debt in the first place, 2) building a financial plan, and 3) tracking our finances. Today, I’m going to dive more into what I would suggest to anyone else about getting out of debt.
What to Do to Get Out of Debt
I’ll start by saying that I do still have debt. I have a mortgage. It’s cool. It’s being worked on. The house is also an asset we can leverage against the loan. Enough of that though. The Warrior family is debt-free for all intensive purposes so we will move on.
I’d like to take this from a what-if scenario to reality.
What if I was in $10,000 of debt tomorrow? What would I do?
The first thing I’d do is break out Google Drive and start a spreadsheet. A spreadsheet of my debts? Nope. I’d start with the in’s and out’s. What is coming in each month and what is going out.
To be honest, tracking our monthly in’s and out’s brought huge focus to our eventual plan. We actually knew, for once, where everything was going. Right off the bat, we had some small wins by reducing some “out’s”. Then we slowly chipped away more and more.
If all you do was track your money (aka budget), you will be much further ahead than most people. Why? Because there’s something that clicks in your head that says, “This isn’t adding up,” when you are blowing through your money at Whole Foods (like me). It wasn’t until I actually added up the numbers that I was able to get in the correct mindset.
The second thing we would do is eliminate all credit cards. Now, this is somewhat a two-parter as we would also build a $1,000 emergency fund first. The emergency fund and cutting credit cards tie together. Once we have that fund, then we would, at the least, freeze our credit cards in ice. Yes, you read that right. Why? Tougher, but not impossible to get to.
The longer the credit cards stay in the wallet, the likelier they will be used for non-emergency’s.
The third thing we’d do would be to give every single dollar a “job”. Each dollar has a responsibility and I’m their manager. If I’m not managing them, they slack off and I suffer. If I manage them well, they will return the favor.
These days, I try to get every dollar in a job. It’s actually become a fun job as we have gotten out of debt. Sounds weird as the dollars aren’t real people, but I am learning how to take ownership of the responsibility. This has led to success in our other ventures where I now manage instead of trying to handle everything. I can’t literally make money make more of itself, but I can put it into a fund in my 401k and forget about it (other than the quarterly rebalancing).
That’s it…to start.
The Biggest Problem with Getting Out of Debt
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What’s the smallest, easiest action you can take? Now do that and follow that up with the next easiest action. Just keep doing that. build momentum until you can start tackling the larger things.
If you buy a candy bar at the vending machine everyday, stop buying it starting today. Boom! Saved yourself $20-30 this month. Yes, you don’t get the candy bar, but you get a little closer to freedom.
Stop overthinking finances. They aren’t your enemy unless you let them be.
Often, the biggest problem with getting out of debt is ourselves. We create more frustration which leads to lack of action which leads to more frustration. End the horrible cycle and take small positive steps towards financial peace.
Shoot me your thoughts, suggestions and questions down in the comments.