Eliminating debt can mean the difference in how you live your life and even the overall quality.
In the new year, millions of people create elaborate New Year’s plans to “Start” something all over again. Whether it is to…
Start losing weight…again
Start eating healthier…again
Start saving money…again
Or even to Start getting out of debt…again, statistics say new year’s resolutions only last a few weeks in January.
Well, I can attest that I have had many “Starts” at the beginning of the year and yes, many of my resolutions only lasted a week, as well. All, except for one…
After looking at our finances, particularly the negative number that had a few zeros at the end, we knew we were in over our heads in debt due to credit card bills and student loans. How did we get this far gone? How did we sink so low? We thought we were just using the cards for medical bills, car breakdowns and other emergencies; however, when we took a close look at our statements, we were using our credit cards for EVERYTHING…Eating Outings! Mall trips! Vacations! Our spending had gotten out of control.
So, to “wheel” our finances back in, we took a hard look at what we were doing, how we were doing it and why we felt the need to do it. Since then, we have paid off able to pay off thousands of dollars of debt, funded our Emergency Savings, and are working to leave a financial legacy to our children, rather than bills. And we did it in a short amount of time! Although we still paying off debt, we are a few bills closer to meeting our goal…Financial Freedom!
So, what did we do?
- We determined how much we were worth (and I am not talking about self-esteem); we actually calculated our net worth. Net worth measures how much you own (assets) against how much you owe (liabilities). Once we calculated our debt versus our assets, we were astonished as to how much debt we had actually accumulated. The negative number meant we owed more than we owned. (Click here to sign up for a FREE tool to calculate your net worth called Personal Capital.)
- We determined a debt repayment strategy. Once we actually saw how much debt we were in, we determined which debt we would eliminate first, second, third and so on. For many, the quickest and easiest way to begin reducing debt is to begin with the smallest. Why? Because once you have conquered one debt quickly, it motivates you to continue.
- We created a spending plan. Since we already determined which debt we would pay first, we looked at our actual spending habits, determined what we could cut or reduce (i.e. eating out, cable) and put any extra money we had on whichever debt we determined to pay off. We then wrote out a budget (ours is actually on an Excel spreadsheet) based on our pay checks and assigned every dollar a job. Our paycheck was spent on paper before it was deposited into our account allowing us to know ahead of time where our money was going.
- We were intentional. Since we had already written out our spending plan beforehand, on payday, we would pull out our budget and pay each bill listed…ON PAYDAY! We were intentional on ensuring we stuck to our predetermined monthly budget and intentional on paying each bill the day we got paid. This reduced the need to spend money since money was not just sitting in our account.
- We were accountable to each other (and others). We held each other accountable. We knew we wanted to pay off Debt A, B and C before the end of the year, so if someone asked us to go on a weekend trip to Myrtle Beach and we had not already included it in our budget, guess what? We had to say “no” regardless of how much we really, really wanted to go. We also had family members who knew our plan and would hold us accountable and keep us encouraged when we were having a “moment” in our journey to debt freedom. Being accountable to each other and others helped us keep our “eye on the prize” and have success in accomplishing our goals each year.
As a result, we have paid off over $40,000 worth of debt in under two years and we are working tirelessly to ensure we actually meet our goal. Although our “Start” initially, seemed daunting, once we created a plan and followed the steps aforementioned, it has been nothing short of rewarding.
So, do not wait until the new year to make changes, Start Today!
START today moving towards financial freedom.
START today creating new money habits.
START today “slaying debt”.
But whatever you do, don’t just START, FINISH!
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