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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 September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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