7 Vital Debt-Free Tips
It is a badge of honor to be debt-free nowadays. The sheer amount of diligence, focus, and sacrifice it takes to eliminate every trace of debt in your life is truly mind-boggling. I know very few people that have zero credit card, auto loan, student loan, or mortgage debt, mainly because of the staggering amount of capital to purchase these items and the sheer amount of pressure to own them. We are expected to have a beautiful home, a new car, a college education, and the latest clothes, and people will judge you if you don’t. I have personally been shamed on many occasions for my frugality, and I am nowhere as extreme as some of my minimalist counterparts.
If we can’t afford these items, we are thus expected to finance them through debt.
However, for those who are struggling with mountains of debt and are looking for a way out of their dire situation, here are some excellent tips to get you started:
1. Set your S.M.A.R.T. goals. You must begin with the end in mind. What kinds of debt do you have? How much do you want to eliminate? When do you want to pay it off by, and is it feasible to do so? The answers to these questions will reveal the goals you should be setting. Here’s more information on how to set S.M.A.R.T. goals if you are new to the topic.
2. Set your expectations appropriately. Debt is a very challenging and sensitive subject, so be prepared for this. There will be setbacks, and sometimes you will feel like you are going backwards rather than forwards. Realizing this at the beginning and developing the resolve to bounce back after a setback will vastly improve your ability to reach the finish line and make it to the positive.
3. Use the Debt Snowball method! There are many strategies to pay off debt, but the most effective is Dave Ramsey’s Debt Snowball method, which focuses on paying off your smallest debts first to gain quick wins and momentum.“But doesn’t that make you pay more in interest?” you might say. Mathematically, the answer is yes. However, studies have shown that paying off smaller debts first regardless of the interest rate will lead to more debt reduction because the small wins build confidence and commitment to the process.
Click Here to for an in-depth example of the Debt Snowball Method
4. Budget and track everything. Keep every receipt, and record every transaction you have. Formulate a budget that you can adhere to and still afford to pay debt with. Simply knowing where your money is going provides immense power over your finances.
5. Stick to the plan! This is the hardest part about getting out of debt. Breaking a habit is a process. You will need to exercise patience, restraint, and faith that you will reach your goal, no matter how long it takes. Know that the rewards will outweigh the sacrifices and financial freedom is a special type of power.
6. Reward yourself. Set incremental goals, such as 25% 50%, and 75% of debt reduced, and treat yourself to something nice. Don’t go all out and blow your budget, but do something that is going to make you feel really good about your progress. You can take yourself out to a fancy dinner, buy a pair of those shoes you’ve been itching for, or take yourself out to a long-awaited movie (and watch it in IMAX 3-D)—you deserve it!
7. Forgive yourself. At some point, you are going to blow it. You may take a spur-of-the-moment trip, or find a sale that is too good to resist. The first thing you are going to want to do once the temporary high wears off and reality sets in, is to beat yourself up, which could lead to continual bad behavior that will keep you in debt. Instead, forgive yourself for your mistake and move forward.
Success in your finances is challenging, but possible. All it takes is discipline and a plan. Following the steps above, you will have enough of both to eradicate debt in no time flat.
