Set goals. I have achieved nothing in life worth discussing, that didn’t start out in goal-form. If you don’t know where you are going, how do you know which path to take? “Get out of debt” is a great goal, but get more specific. Set dates. Set times. Set specifics. And then outline how you want to get there. In order for you to achieve big things, you have to mentally decide and accept your own challenge. Write them down. Save them. Post them in a visible place if this helps. I have never set a financial goal that I haven’t reached. But I never would have accomplished what I have without a clear destination, with specifics and steps to get there. I really can’t emphasize this step enough.
Set goals that are specific and concise. For example: “I want to pay my car loan off by the end of the year.” Find out the exact balance. What does that require you to do to get there? How much must you pay each month to pay off your car? How can you earn extra money to put on your car in order to pay off the loan? What can you cut out of your monthly budget to free up some extra cash to put on your car? Can you pay bi-weekly instead of monthly? Figure out your path.
Be sure to set realistic goals, that still push yourself beyond your comfort level. Hard things make us stronger. It is ok to squirm a little bit. It is hard, but so rewarding.
Set Your Path. How are you going to reach your goal? One common method (that worked for our family) was to focus on paying off the smallest debt first. It is very motivating to see the balances start to disappear. It really keeps the momentum going when you see bills get paid off and you move to the next one. Pay the minimum payment on all of your debts, except the smallest one. Put all of your extra money on that bill, until it is gone. Then, when you move to the next one, you add what you were paying on the last bill, adding the minimum payment and any extra that you are paying on the current bill. You will be surprised at how fast your balances decrease. It is so encouraging to pay bills off and move to the next one. My husband and I paid off a $16,000 debt and car loan in only 18 months while we were in college and had NO extra money. I still don’t know how we did it, but we did, using this method along with a lot of self-control 🙂 We lived debt-free the for the duration of college.
Many people think that if they spread out their payments, they will keep them all smaller. This takes longer and you accrue interest on all of your accounts, instead of knocking them out one at a time. Once one bill is gone, you won’t have to pay the interest on it anymore, meaning that money can go to paying off your other debts.
Start spending differently. This sounds obvious, and there is a pretty funny Saturday Night Live segment spoofing this concept, but spend less than you make. I would say that if you are struggling to get out of debt, get rid of credit cards. Maybe not permanently or physically, but don’t use them anymore. Don’t even use them intending to pay them off at the end of the month, until you can get your debt under control. Credit cards are great and have their place, but they are also a temptation and can be a pitfall in your path to getting out of debt. They are convenient and somehow have a magical way of numbing the reality of expenses and costs. Don’t let this fool you. I have done it. It is a common experience for some. You have a bill to pay, you don’t have the money or it was more expensive than you expected. You put it on a credit card. Most times, we do that so we don’t have to “deal” with that expense right now. Maybe it wasn’t expected (hello- new tires, medical expenses, car repairs!) But don’t fall into this. The best way to handle your debts, is to face them head on.
In order to get rid of your debt, you need to be on top of your finances. That means sitting down and creating (or analyzing) your budget. Look at how much you spend. Setting and maintaining a budget will help you stay on track and know how to best use your money to get out of debt. Budgeting can be a drag, but knowing where your money is going each month is essential to making financial changes that will improve your quality of life.
Sometimes, we sit down and realize we simply don’t make enough money for what life requires. This is a sobering reality and can make the goal of “getting out of debt” simply unreachable. What next? If at the end of the month, you don’t have the money for your basic needs and responsibilities, it may call for fundamental lifestyle changes. Maybe this requires renting a cheaper place. Maybe it requires a budgeting overhaul and maybe the extra expenses need to be re-evaluated. Don’t give up. Getting out of debt is possible, but it could be time to get creative. My husband and I have been in this position, more than once. We put our heads together and got resourceful. In the past, we have decided to cut expenses that aren’t “needs” and figure out ways to make extra money. There are so many side hustles and ways to make money on the side. We both took side jobs to earn extra money, so that we could still make progress in getting out of debt and staying out of debt.
*Blogging is a great way to earn extra money on the side to help you get out of debt and make a great living. If you are interested in making extra money on your own time from home, you can see my step-by-step tutorial on how to start a blog and get on your way!
Here are a few articles about how you can make extra money to help you on your path to pay off debt: