Let’s start with defining what exactly debt is. If you carry a large balance on credit card bills, student loans, car loans, etc, these are all forms of debt. Do not fret, you are not alone. The current household debt in the nation is at an astounding $13.54 trillion. Debt in America is a real thing and can be a life long struggle if you do not find a way to get ahead of it early. Anything that you owe to someone or an entity is considered a debt. Ongoing bills, for example; electricity, water and utilities aren’t considered a type of debt. Things of that nature are considered expenses. But, you have to be careful because how you decide to pay for your expenses can manifest into debt. If you get payday loans, personal loans, home equity loans, these are also considered debt. Also, credit cards are something that a lot of people use to pay for their expenses and it is one of the easiest things to fall into a debt trap over.
The first order of business when it comes to paying off debt is figuring out how much you owe. Determining or adding up your total debt can be overwhelming. The idea of calculating your total number is so that you can start making the correct moves to get out of it. There are proven plans that can help you get out of debt once you know your totals, Dave Ramsey’s Calculator Tool is an awesome tool to help you calculate your total amount and also a predicted time period alleviate yourself from debt.
The second step is understanding that debt is more about motivation than it is about the numbers. You have to put yourself on a very strict budget. The only way to get ahead of you’re spending is to stop spending more than you are making every month. You have to create a plan and stick to it. That means every single dollar you spend, counts. It has been said that it takes at least 3 months to get into a budget that works, so do not lose hope.
A very popular method that Dave Ramsey created & heavily promotes is called, The Snow Ball Method. It is a well thought out strategy where you pay off your debt in order from smallest to largest. When the smallest debt is finished, you essentially roll the money you were paying on that debt into the next smallest balance:
Step 1: List your debts out from smallest to largest (do not take interest rate into account).
Step 2: Make minimum payments on all other debts besides the smallest that you are currently working on.
Step 3: Pay as much as possible weekly/monthly on your smallest debt.
Step 4: Step 1 through 3 until each debt is paid off.
The snowball method is said to work simply because its about behavior, not math. When it all comes down to it, you will have hope when you see your debts trickling away. Small wins are still wins and having those small wins gives people more drive than math ever will. Consistency will drive results. When the plan works, you are more likely to stick it out. You will have more cash freed up by the time you get to your largest debt that it will create that snowball. Then you will have enough month to put towards your savings, instead of your debts!
Another method to paying off debt is simply increasing your monthly income. Getting a raise doesn’t always come easy, so adding additional supplemental income to your monthly take home is key. If you are serious about paying off your debt you should not shy away from getting a second job or three. There are a lot of ways to make money passively now with how creative the internet is. You can get paid to take online surveys, pick up a night or weekend job after your eight to five. As mentioned before, the motivation is going to be your driving factor. There are also a number of “cashback” applications you can download on your phone. For example, ibotta, ebates, swagbucks, dosh, panel app, just to name a few. These are all applications that will pay you for doing your every day shopping. Yes, sometimes it is tedious and requires extra effort, but other applications just require to leave the application running. There you go, passive income.
Some other methods, getting creative, would be to sell your unused frequent flyer miles, get freelancing gigs online and if you are an okay writer become an author on textbroker. You can earn extra cash writing articles in your free time. It is not a lot of extra money to put towards debt, but something is better than nothing at all. Another quick and easy way to get some extra cash is to sell your old clothes. There are a ton of consignment shops that will take your gently worn clothes and give you cash for it!
In conclusion, paying off debt won’t be easy. But the foundations are clear. In order to be fully financially independent, you need to remove all of the debt from your life. The way you go about it is up to you, but you cannot give up or become discouraged. Get into the mindset that you are doing this for yourself and your future. Make a clear and concise plan and do not waiver from the plan. Believe you will get their and manifest that with everything that you do on a day to day basis.