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A Get Out of Debt Strategy That Works

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A Get Out of Debt Strategy That Works

    You’ve decided this is the year you’re going to get out of debt once and for all. You’re committed, you’re determined, now the only thing you need is a plan. There are many plans for debt reduction, but they all generally include the same elements. Debt accumulates over time for a variety of reasons. So, it is expected that time will be required to reduce that debt as well.

    Be patient and take it one step at a time…you’ll see results.

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    Get a clear picture

    You have to understand the reality of your indebtedness. It’s impossible to make a plan to reduce debt if you don’t know the extent of it. Be honest. It does no good to deceive yourself about the amount of accrued debt.

    Stop digging the hole

    Don’t accumulate more debt. It’s a never-ending cycle with no way out. Spending habits must change for any plan to be successful. It’s crucial to live within your means, (below your means preferably,) in order to apply that money to debt repayment.

    Build an emergency fund

    Plan for emergencies first. A savings cushion is imperative for several reasons; it will allow some small modicum of security, you will be prepared for a crisis, and you will have liquid reserves for those instances when only cash will do.

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    Figure out where the money will come from

    Track your spending for a while if necessary. Create a budget or if you prefer, call it a spending plan. Make cuts where possible, but be sure to make it livable. A budget does no good if it’s not possible to stick to it.

    Increase your income if possible. Take on extra work where available, volunteer for overtime, or find a second job. Most people don’t want to hear that, but if you seriously want to eliminate debt, sacrifice is necessary. The extra effort will pay off, literally.

    Liquidate other assets

    Consider liquidating other assets. Experts don’t recommend taking money out of a retirement funds, because that will have serious repercussions in the long term. Taking out a second mortgage is the most common tactic, but be careful before you do that. Only resort to borrowing further against your home if you can firmly commit to stopping the cycle of overspending, otherwise you will just accumulate more debt. You are putting your home at risk, so make sure it’s worth it.

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    Do you have any investments or possessions you can sell? While you may be earning interest on your investments, if it’s less than the interest rate on your debt, they may be worth liquidating Consider selling unnecessary equipment, (boats, extra cars, etc.) or valuable jewelry if it doesn’t have extreme sentimental value.

    Decide on a debt reduction plan

    There are many methods to reduce debt. None is better or worse than the other. It’s a matter of choosing what’s the most comfortable for you. Money is a very emotional thing, and so debt reduction is partly mental. Find a plan that you can commit to.

    One option is to pay off the credit card or loan with the smallest balance. Be sure to make the minimum payments on other debts, but concentrate on paying off one debt at a time. Once the smallest debt is retired, move on to the next smallest. The advantage of this method is mostly mental. It allows you to gain momentum and the sense that you’re making progress.

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    Another option is to pay off the debt with the highest interest rate. This is generally the most financially advantageous. By eliminating the higher rate credit cards, you’ll reduce the amount of interest that is paid overall. Once again, move to the next debt item with the highest rate.

    A third option is to eliminate the oldest debt first. Old debts have been hanging around for a long time. These debts have most likely taken an emotional toll. If you finished college 15 years ago and you’re still paying off your student loans, go ahead and pay those first. You’ll feel a tremendous sense of relief.

    No matter the extent of your debt, it’s not hopeless. However, commitment and persistence are vital. Whatever method you choose, if you’re consistent, you will be successful.

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    (Photo credit:Get Out of Debt Key via Shutterstock)

    More by this author

    Royale Scuderi

    A creative strategist, consultant and writer who specializes in cultivating human potential for happiness, health and fulfillment.

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    Published on November 8, 2021

    How To Achieve Financial Freedom With the Right Mindset

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    How To Achieve Financial Freedom With the Right Mindset

    What would being financially free mean to you? Have you made the mistake of thinking that financial freedom requires millions of dollars and decades of hard work? When it comes to our relationship to money, the answers really lie in our mindset. Change your mindset around money and your entire financial outlook will change with it.

    And no: we’re not talking about putting a check for a million dollars under your pillow at night. This is about you becoming a financially free person, in whatever capacity you choose. And that’s really the key: it needs to be defined by you. So many people outsource this responsibility to society/celebrities/the government etc… and as a result never achieve it.

    What if you could identify what financial freedom looks like for you, realize that it is possible to get there in a matter of a few months and then build a road map to do just that?

    Read on, because that’s what we’re going to open you up to. This isn’t about giving you specific strategies “guaranteed to work in five minutes or your money back…blah blah.” This is about awakening you to just how powerful you are, where your blocks lie and how to smash through them effectively.

    Financial Freedom – What is it?

    Well like I said: I’m not going to define this for you. That misses the whole point of this article, but let’s lay out some ideas to get you started.

    Typically, when we talk about financial freedom in the west, we really mean: freedom from needing to work, in order to meet financial obligations. We know that there has been a rise in depression amongst nine-to-fivers, 62% as a matter of fact between 2019 and 2020 in the USA.[1] It’s therefore no wonder that there has been correlative uptick in the search for alternative solutions to finances.

    This depression is largely as a result of feeling trapped, unable to realize potential and being denied opportunity. It is also likely that, thanks to a more global world and social media: we see just how abundant life can be for some; like a carrot dangled tantalisingly close, but just out of reach. We yearn for more meaning in our lives, more excitement and to be able to live on our terms.

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    Finances are (as we see it) the stumbling block and the preserve of the chosen few…not us.

    So to start building an accurate picture of what financial freedom would be for you, begin with what your life would look like if you didn’t have to worry about money. How would you feel if you didn’t have to consider your monthly budget, when putting your hand in your pocket to pay for lunch?

    The point is that a lot of the stress and resulting depression that comes from feeling like a ‘wage-slave’ is down to our lack of clarity on what we actually want. We get caught, focussing on what we lack and that perpetuates a mindset of lack that very quickly is reflected in our reality. We are allowing our subconscious, emotional mind to be bombarded with imagery every day that reenforces a sense that we aren’t good enough. That we do not have what it takes.

    That wouldn’t happen though if we had done the work of pinning down exactly what we wanted in the first place.

    Does Financial Freedom Come at Extreme Levels of Net Worth?

    There is a tendency, thanks again largely to how we are conditioned through media, to think that financial freedom only comes at extreme levels of net worth. What if I told you that is completely ill-founded and untrue?

    Using the standard/assumed definition of financial freedom for a moment; this means that you need enough capital to generate a return that is greater than, or equal to your monthly expenditure. That doesn’t necessarily tell the full picture, but nevertheless; it’s is a good place to start.

    If your monthly outgoings (mortgage, bills etc…) come to $3,000 for argument’s sake, you can achieve that with as little as $108,000 invested over three years.[2]

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    Hardly the millions you had probably envisioned is it?

    Remember: we’re not talking about you living a lavish lifestyle necessarily. If that is what you want; fantastic, it’s certainly achievable, but what we’re getting at here is your ability to meet all of your financial obligations without having to work.

    I’m sure you’re unlikely to find $108,000 down the back of your couch, but it is a figure that is well within reach of most working adults. A $36,000 salary opens you up to borrowing that kind of money, and even if you have to continue working in the short term in order to service the debt and keep up with your bills; you’ll have a clear end goal in sight.

    And you’ll have doubled your income in the meantime, for the same amount of work!

    How To Achieve Financial Freedom With the Right Mindset

    As we touched on earlier, coming at your life from a space of ‘lack’ simply perpetuates more of the same. As I always say: your environment doesn’t lie. Look around you, if you’re dissatisfied with any aspect of your life, you first need to accept responsibility for it. If you don’t, you’re abdicating your power to make new choices.

    You may well have been the victim of circumstance in the past, but how you respond and what you do with that experience is up to you. If you choose to look for the positive, however minor it might be in any given situation – your experience of life will begin to change.

    This is, in essence, what The Law of Attraction is all about. What lies behind it is your reticular activating system (RAS). The part of your brain designed to filter out the (as it sees it) unless information, highlight the important information and prioritize your safety. Thanks to it being part of your primeval/‘lizard’ brain however, it predates the conscious mind, intellect and reason.

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    The issue for a lot of us is that we haven’t understood how to communicate in a way that our RAS understands. We can’t translate our conscious desires and are therefore caught in a loop between two incongruous forces.

    Our subconscious wants us to be alive and it bases its criteria for this, largely on the principal of: same = safe. Meanwhile, your quality of life, passive income, work/life balance etc… are inconsequential. That part of your mind doesn’t give a hoot about the utility bill or being able to afford a holiday.

    It is perfectly possible to show you subconscious/RAS the benefits of financial freedom though, or indeed any other outcome you’d like to see in your life. You just have to speak its language. Becoming debt free and financially free is actually one of the easiest things you can communicate to your subconscious, because you have so much ‘real-world’ experience with money.

    Here’s how:

    1. Start by clearing your mind and being present – find a meditation, visualization or breathing exercise that calms your mind, allows you to focus on the present moment and become an observer of your surroundings. The point of this is to stop all of those thoughts buzzing around in your head that are pulling you back to the past, or projecting you into an imagined future.
    2. Then build a mental movie or slideshow of what your average day would look like, were you to achieve financial freedom. We’re not talking about big occasions, huge wins or events; just an average day.
    3. From your position of present observer – start to observe the feelings that arise as you go about this average day in your new life. Do you feel your shoulders relax and drop? Have you got excited ‘butterflies’ in your stomach? Are you smiling more?

    Learn to recall these feelings at will – this will connect the dots for your RAS and you will soon start noticing a shift. Think of it as connecting with your desired future and pulling it into/towards your present.

    Bonus Hack – Practice Gratitude

    We’ve already discussed how you can start attracting/observing the opportunities that will enable you to achieve financial freedom. This involves a lot of work in order to finesse, but the principals are easy enough to understand. Something that we can all do, no matter what we’re trying to achieve, is practice gratitude.

    Using the same principals that I’ve outlined above: something of a ‘catch-all’ that we can train our minds to produce more of, is gratitude. If we can shift our mindset so that the next time some negative, external and unforeseen event occurs, we are still able to be grateful for it; your entire experience will shift.

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    Not only will you observe more to be grateful for all around you on a daily basis, but you will shift out of a mindset of ‘lack’. All of the barriers that stood in your way before (not enough capital, stuck in a job I hate etc…) they will shift to becoming things that support your desires and goals.

    For example:

    The job you hate, when reframed as the means to support a transitional stage of your life (i.e. enabling you to borrow money to invest) suddenly gives you a resource to be grateful for.

    The added beauty of this is that your RAS doesn’t know the difference between a big win and a small win. You being truly, deeply grateful for your socks (for example) carries the same weight as being grateful for your health, or your spouse. This is why I say “practice” gratitude. You can start whenever you want!

    Look around you right now and find something that you really are grateful for, no matter how small and seemingly inconsequential.

    Practicing this will create a snowball effect. Much quicker than you might think: you’ll be overwhelmed with gratitude for your life and all that’s in it.

    In Summary

    Financial freedom is more within your reach than you probably think or feel. Understand that the limits you’re assuming to be there are largely a product of your subconscious mind, having been drip-fed evidence of that over the course of your lifetime. Changing that might take a lot of effort in the short-term, like cranking over an old car, but the effects will begin to build up quickly and self-perpetuate.

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    Apply this mindset to your financial situation and you will find that it too will begin to ‘snowball’. Financial freedom is closer than you think, so start looking for it today!

    Featured photo credit: Pepi Stojanovski via unsplash.com

    Reference

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