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A Get Out of Debt Strategy That Works

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.

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

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    Royale Scuderi

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

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    Last Updated on January 21, 2020

    How to Develop a Millionaire Mindset in 6 Simple Steps

    How to Develop a Millionaire Mindset in 6 Simple Steps

    We all like to dream about being financially wealthy. For most people though, it remains a dream and nothing more. Why is that?

    It’s because most people don’t set their mind to achieving that goal. They might not be happy in their current situation but they’re comfortable – and comfort is one of the biggest enemies of growth.

    How do you go about developing that millionaire mindset? By following these simple steps:

    1. Focus On What You Want – And Take It!

    So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”.

    Millionaires play to win, not to avoid defeat.

    This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

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    2. Become Goal-Orientated

    It’s almost impossible to achieve anything if you don’t set firm goals. Only lottery winners become millionaires overnight. By setting yourself attainable goals, you will get there eventually. Don’t try to get rich quickly — get rich slowly.

    Let’s take the idea of making your first million dollars and expand on what kind of goals you might set to get there. Let’s also say you’re starting at a break-even position – you’re making enough to get by with a few luxuries, but nothing more.

    Your goal for the first year can be having $10,000 in the bank within a year. It won’t be easy but it is doable. Next, you need to figure out the steps you need to take to achieve that goal.

    Always look at ways to make growth before cutbacks. With that in mind, you might want to see if you can negotiate a pay rise with your boss, or if there’s another job out there that will pay better. You might be comfortable in your old job but remember, comfort stunts growth.

    You may also have other skills outside of your workplace that you can monetize to boost your bank balance. Maybe you can design websites for people, at a fee of course, or make alterations to clothes.

    If this is still not enough to make the money you need to save $10,000 in a year, then it’s time to look at cutbacks. Do you have a bunch of old junk that someone else might love? Sell it! Do you really need to spend $10 on your lunch everyday when you could make your own for a fraction of the cost?

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    If you are to become a millionaire, you need to start accumulating money.

    Here’re some tips to help you: How to Become Goal Oriented and Achieve More in Life

    3. Don’t Spend Your Money – Invest It

    The reason you need to accumulate money is for step three. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with becoming a millionaire. You’ll want to quit your regular job at some point.

    Stop working for your money and make your money work for you.

    Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

    There’s not just the stock market — there’s also property, and your own education.

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    4. Never Stop Learning

    The best thing you can invest in is yourself.

    Once most people leave the education system, they think their learning days are over. Well theirs might be, but yours shouldn’t be. Successful people continually learn and adapt.

    Billionaire Warren Buffet estimates that he read at least 100 books on investing before he turned twenty. Most people never read another book after they’ve left school. Who would you rather be?

    Learn everything you can about how economics works, how the stocks markets work, how they trend.

    Learn new skills. If you have an interest in it, learn everything you can about it. You’d be surprised at how often, seemingly useless skills, can become extremely useful in the right situation.

    Start developing the habit of learning continuously: How to Create a Habit of Continuous Learning for a Better You

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    5. Think Big

    While I advise to start off with small goals, you absolutely should have a big goal in mind. If you have a business idea, then that is your ultimate goal – to start that business and make a success of it. If you want to invest your way to millions of dollars and do little work other than research, then that is your big goal.

    There is no shame in not achieving a big goal. If you run a business and aim to make $1 million profit in a year and “only” make $200,000, then you’re still significantly ahead of most people.

    Aim for the stars, if you fail you’ll still be over the moon.

    6. Enjoy the Attention

    To be successful, you have to be willing to promote yourself and enjoy the attention to a certain extent. Now the attention doesn’t need to be on yourself, it could be on your brand, but attention definitely attracts money.

    Never be embarrassed to get your name out there. That means finding a spotlight and being brave enough to step right up underneath it.

    If you run a business, try contacting the local papers. You’d be surprised at how amenable they often are to running a story about you and your business, and it’s all free publicity.

    Above all, remember: You control your own destiny. Push hard enough for anything and you’ll get it.

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    Featured photo credit: Austin Distel via unsplash.com

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