Debt Free Blog

If you’re swamped in debt and don’t know where to start, check out these first 10 steps. No matter how much debt you have, these will help you get on the path to being debt free:

1. Make a Budget
   Without assessing your current level of debt and bills, you won’t have a clear picture of where you are right now. You need to know where you are so you can take steps to get out of your current situation.
   Write down all your monthly bills and expenses, including food and gas. Write down everything.
2. Assess your Damage
   If your minimum monthly payments are more than your income, you will need to make some tough decisions.
3. Sell Big Stuff
   Sell your car to eliminate a car payment & insurance, sell your home and rent an apartment. You have to spend less than you make! Getting rid of high monthly payments can give you cash flow to eliminate your debt fast.
   
4. Get an Extra Job
   You may not be able to reduce your debts enough. Whether or not you can, it may be a good idea to get a part-time job so you can put as much money as possible on your debt.
5. Save Cash for a Rainy Day
   Before you start paying off debt, first put $500-1,000 in an emergency fund. If your car breaks down right in the middle of paying off credit cards, it would be too easy to just use a credit card and use the “it was an EMERGENCY” excuse. Put away a little cash so you can handle what life throws at you.
6. Pay Off the Smallest Debt First
   Regardless of interest rates, pay off the smallest balance first, then move to the next. Paying of the smallest debt first will also give you immediate feedback, and give you more cash to put on the next largest debt per month. This is what Dave Ramsey calls the “Debt Snowball” and it really works.
7. Change Your Lifestyle
   While you are trying to pay off debt, you shouldn’t be going out to eat, going to the movies, and spending money frivolously. Budget some money for fun, but you have to change your lifestyle… living above your means is what got you into this place in the first place.
8. Have a Yard Sale
   Go through your home and find things you’re not using. Have a set of golf clubs but haven’t played in 3 years? Video game consoles the kids never play anymore? Have a yard sale or sell your stuff on eBay, and put that money on your debt.
9. Cut Up the Cards!
   If you have credit cards, cut them up! They’re too tempting and can get you right back into debt. Before you know it Christmas will be here or your car will break down. It’s too easy to just put it on a credit cards and think “I’ll pay it off next month” but next month never comes.
10. Make a Commitment
    You have to make a conscious decision to get out of debt. As an ex-smoker, I think getting out of debt is a lot like quitting smoking. You have to really want it. You’ll go through withdrawals… you’ll see things and think “I just HAVE to have this!” Walk away. Like quitting an addition, a lot of it is habit. It’s hard, but once you change your habits it becomes much, much easier.