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14 Important Steps You Should Take To Free Yourself From Debt

14 Important Steps You Should Take To Free Yourself From Debt

Whether your current debt is large or small, the challenge of getting out from under bills and “I owe yous” can feel insurmountable.

Free yourself from the quicksand by doing the following.

1. Acknowledge that Houston, we do have a problem.

If you are in debt, you have a problem. The degree to which the problem is manageable depends on whether you are in planned, deliberate debt, such as student loans or the purchase of a specific type of vehicle for work; or in chaotic debt, such as the kind that results from taking too many pretty dates out for expensive drinks you can’t afford. You must accept that debt is a problem before you can fix it. So throw your hand in the air, state your name, affirm that you have a challenge before you, and commit to meeting that challenge and free yourself from debt.

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2. Take stock of the situation.

Why are you in debt? What are you spending money on? How much money are you making? Has your debt increased, or are you having trouble climbing out from under hefty interest payments? Are your expenses driving you further into debt, or is it the costs associated with caring for a family member? Don’t worry about finding solutions just yet—first, identify the problem areas.

3. Step back from your emotions.

Spending habits are deeply personal, because they reflect our priorities. There are often added layers of shame, guilt, and regret when discussing debt.  Recognize that none of those emotions will help you solve your current debt problem, and step away from them.  Focus on the fact that you are taking control, you are asserting yourself, and you are disciplined and focused enough to make this happen, all of which are positive emotions.

4. Break out your pen.

Dedicate a notebook or binder to your “get out of debt” plan. Write down anything you identified as a problem area. Be sure to list all debts, who or what you owe money to, and your current payment schedule.

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5. Stop flailing.

While you are evaluating your spending habits and developing a course of action to correct your debt, stop spending. It is much easier to evaluate how and why the boat is leaking without more water pouring in. When you make purchases again, you will be able to do so with deliberate intention.

6. Record all expenditures.

Create a section in your notebook, or an online spreadsheet, to evaluate all expenditures over the course of the last six months. Print credit card statements, online bank records, and dig those receipts out of your purse, car, and gym bag. You must gain an accurate picture of where your money is going, and if debt is a problem, you likely don’t have this picture as in focus as you would like.

7. Identify patterns.

Can you identify patterns in your spending? Do you, for instance, always break the bank when you visit certain stores, or the day you get your paycheck? Do you spend a great deal of money on certain activities?

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8. Categorize spending, and prioritize.

Food, water, basic shelter, simple transportation, and functional clothing are needs.  Everything else is a “want.”  Break your spending into categories, starting with “needs” and “wants.”  Cut out all unnecessary items, and realize this might mean your cable subscription, smart phone, high speed internet, and a slew of other high-tag luxuries modern man is accustomed to having at his fingertips.

9. Be willing to make big changes.

Is rent eating you alive, or are you spending high dollars in gas each month to commute? You may have to move, locally or to another state, to lower your cost of living. You may have to drastically downsize. You may have to put that hobby on hold for a while. Commit to doing whatever it takes to get out of debt.

10. Seek expert help.

You are not the only person to stagger under debt, nor will you be the last. Talk to a financial planner at your bank, or attend a debt management class. There are numerous resources available.

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11. Do your own research.

Anytime the subject is money, be sure to actively engage your brain, scrutinizing all information you receive to confirm or reject its application to your financial situation. Get a library card, and spend some quality time there getting smart on financial management basics, as well as any unique considerations you may have. Bonus: libraries often offer basic financial management classes

12. Get creative in boosting income.

An extra dollar earned is an extra dollar to pay off that debt.  No opportunity is too menial, too demanding, or too low-paying for your time; if you’re in debt, you literally cannot afford to pass up income opportunities. Take a formal second job, or babysit, walk dogs, shovel manure at a community barn, scrub dishes, freelance online—aggressively seek opportunities for additional income and seize them.

13. Pay the maximum monthly amount possible.

Does your lender have penalties for paying off your debt early? Pay the maximum monthly amount possible without penalty, on time, every month.

14. Stay the course.

It took you a while to accumulate debt, and it is going to take you a while to get out from under it. Remain patient, keep chipping away at it, and soon you will be debt free and relaxed.

Featured photo credit: LendingMemo.com via flickr.com

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Published on November 11, 2020

10 Best Ways to Save Money Faster and Smarter

10 Best Ways to Save Money Faster and Smarter

People love to talk about budgeting, reducing spending. and investing. But unfortunately, talk is cheap, and poor money management is expensive. It’s easy to talk about the best way to save money, but putting it into practice is a different thing.

What people need to talk about is the practical and efficient ways you can quickly save money to accomplish your goals. After all, they don’t teach this stuff in school.

Here are the 10 best ways to save money faster and smarter.

1. Cancel All Your Subscriptions

Yes, all of them.

Okay, you can keep your wifi and trash. But other than that, cancel all your monthly subscriptions for one month. You will survive, I promise. Better yet, you will realize you won’t miss all of them.

Now that you have had 30 days to examine what you really missed and what you never thought twice about, you can add some of them back in. The others? you never have to think about them again.

This is something you can and should do with every part of your life. If it’s clutter, cancel it. Being able to step back and see what is cluttering your life and what is excelling your forward helps improve your quality of life and financial standing.

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2. Automate Savings From Your Paycheck

Many of us are so excited about getting a new job that we rush through the paperwork during the hiring process. Good news for you, I have had lots of jobs so I have seen it a million times.

There is an option for a portion of your paycheck to go directly into a secondary savings account. This is by far the most effective way to save money every month. We tend to spend most of what we have. So, if we take it off the top first, then it’s less likely to be spent. Just head over to HR and ask. It will only take two minutes.

3. Cancel the Happy Hours for the Rest of the Pandemic

We are in the middle of a global pandemic, which means that there is no better time to buy some drinks from the local store and stop shelling out $5 a drink at the local cocktail bar. When we look back at our bank statements, we are always shocked that fast food and alcohol can add up so quickly. You can easily save a couple of hundred dollars just by taking this step.

A great exercise is to print out your last bank statement and highlight all the areas of alcohol and fast food. The amount may surprise you and make you think twice about that old fashion.

4. Online Grocery Shopping

Some people think online shopping increases the amount they spend. For the most part, I would agree—except for this category.

Online grocery shopping is now a no-brainer, though. Whenever you walk through a grocery store, two things always happen: you always grab impulse items, and you never know the total of your cart until you checkout. This means that we always spend more than we originally planned.

With online shopping, you can see your total as you add items to your cart. You are way less inclined to make those impulse purchases and because of that, I would venture to say that you could even pay to have them delivered to your door and still save money each month by choosing online grocery shopping.

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5. Get a Famzoo Debit Card

This is something my wife and I swear by, and it’s great for the entire family! Famzoo strictly exists to help families and kids budget their money better. Each month, my wife and I have an allotted amount loaded onto our pre-paid Famzoo debit card. This amount has changed every year depending on promotions, kids, stage of life, etc.

The important part is that when you give yourself the freedom to spend a certain amount, you are more likely to only spend the allotted amount. Think of it as a diet. If you are counting calories, you are more likely to stick close to the amount you set. You can also look for some tips online to better stick to your family budget.

6. Purge

This is actually my favorite to do, and it is actually one of the best ways to save money. Raise your hand if you have ever moved. Okay, so everyone.

When we move, we are always amazed at how much junk we have acquired. I have found that about every 6 months, I can find a couple of boxes to sell online of things that we never use. This not only gives you so extra quick cash, but it also keeps your house more tidy and organized.

Now, go clean out that garage!

7. Amazon Subscribe and Save

32! That is how many items I have setup on amazon subscribe and save. Let me explain.

This sounds expensive, I know. But it actually saves us hundreds of dollars per year! We all need toothpaste, shampoo, razors, laundry detergent, toilet paper right? This feature is truly a triple threat. When you have more than 5 items on subscribe and save, you automatically unlock the max savings for every product on your list. This can be up to 20% per item!

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Now, even better is that it ships straight to your door on the exact day you want the item, maybe monthly or maybe you only need it every 4 months. This way, you never have too much or never run out. Either way, it’s totally customizable.

Lastly, there is no contract for any items, which means you can switch brands or items at any given time at no cost. My advice: every single staple item should be on your subscribe and save.

8. Rewards

This may ruffle some feathers, but if you are using your debit card for purchases, you are missing out on free money! We have this notion that credit cards are evil but in reality, they are the same piece of plastic as your debit card.

How you use it can be bad, don’t get me wrong. But if you want my opinion though, ditch the debit card and get a rewards credit card. Use it just like you would your debit card and make sure to pay it off as soon as the statement comes in!

Just to give you an idea of how powerful this can be in terms of money, here are some things that our miles have paid for:

  • 4 nights in Vail with Flight
  • Rental car in Vail (convertible might I add)
  • Flight to Ireland
  • Flight to Hawaii
  • Multiple staycations at very nice Hotels

That’s roughly about 7 thousand dollars in travel expenses so far! Remember that the credit card is just a tool and can be one that benefits you if you use it wisely. Ironically, this can be an effective way to save money.

Pro tip: If you don’t trust yourself carrying around a credit card, then set up all your monthly bills with your credit and leave it in a drawer at home. This way, you rack up miles but don’t get tempted to overspend.

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9. Vacation With Friends

Now, I know travel is hard right now but what a perfect time to go grab an Airbnb in the woods with a couple of friends and detox from the world right now!

Vacationing alone can be pricey and get rather boring quickly, but if you split lodging and set out for a road trip, it can become affordable quickly! For a couple of hundred bucks apiece, you can have one of the most relaxing vacations ever. Don’t forget to pick up your food at the local grocery store to avoid eating out every meal!

10. Make a Budget

When is the last time you updated your budget or made one for that matter? Making a budget is like writing down your goals. If you don’t make a budget, then you will struggle to save.

How can you know if you are spending wisely if you are not tracking everything?

Our advice would be to get a finance app like Mint, Every dollar, or personal capital. All these apps are free and do a tremendous job of tracking spending and budgeting. I still am old-school and have an excel spreadsheet which I do highly recommend.

Work Smarter, Not Harder

The entire goal is to boost your bank account while reducing the effort required. Efficiency is the name of the game, and automation is the key player. Luckily, we live in a world that has more perks than we can ever take advantage of. But if I were to choose a few, it would be the ones above.

Taking on all 10 of these steps may seem a little daunting. You can first try to pick three of your favorite and start there. Saving money doesn’t have to be a chore as long. As we use the tools correctly, it can be quite effortless. And now, you have a great blueprint to get started!

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Featured photo credit: Sharon McCutcheon via unsplash.com

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