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For too long, debt has been just a thing we all have. I’ve grown accustomed to having a payment for this and a payment for that every week. It wasn’t until I read Dave Ramsey’s Total Money Makeover that I realized paying hundreds of dollars every month on bills shouldn’t be normal. It should not be something we just accept as a way of life. I also saw that my family and I could have a whole new kind of life just by paying off our debt; a life that was rooted in a financially strong foundation. And so, here we are. We are working on eliminating debt from our lives. Those debts include two cars, two credit cards, my student loans, and medical bills. The housing debt will come much later (we’re following Dave’s baby steps).
Now that we’re in the thick of things, and have the help of Dave, I look back and realize the biggest hurdles that had been keeping me from eliminating debt faster.
DO Have an Emergency Fund
Think of it this way: your car just broke down and will cost $700 to fix. Would you rather have to use the $700 you were going to put toward your $750 credit card bill? Would you rather swipe your credit card – adding $700 to your already high debt? Or, would you rather take it from a fund that is in place to pay for life’s little surprises? You won’t feel the burn (too much) because the money is already there and you won’t have to add on more debt.
Be prepared for emergencies and keep yourself protected. Create an emergency fund fast.
DO Use a Debt Snowball
The debt snowball is a genius way to pay off debt. Being able to knock down on debt after another is truly motivating. And once you get further into your snowball and the payments get bigger and bigger, you’ll start to be able to pay debts off faster and faster. Want to learn more about this method? Read this handy guide to the snowball method.
DON’T Use Your Credit Card
If you continue to use your credit card while you are trying to pay it off, you will get stuck in a vicious cycle that surely won’t end. Even if you pay on your card more than you just spent, you are still adding on to your debt. Do yourself a favor and put the plastic away. For good.
DO Pay Your Debt First
You know how you should “pay yourself first” when it comes to saving money? You know the quote. “Don’t save what’s left after spending. Spend what’s left after saving.” That rings true for paying debt too. One of the first things you should do on payday is put money towards your debt. Have an idea of what you’ll be paying towards your debt, and put that into your budget. Always pay your debt first before you spend money elsewhere.
DO Budget Every Dollar
If you are too generic with your spending categories, chances are you’ll overspend. And we all know what happens when you overspend. You pull out the credit card to cover the shortage – again, putting yourself into that vicious cycle of borrowing.
DON’T Spoil Yourself
When your debt repayment is going well, it can be tempting to treat yourself to something nice because of all your the hard work and sacrifice. But spoiling yourself only takes money away from – you guessed it – YOU. Keep your eye on the prize – no more monthly payments! Once you’re debt free, you’ll have more money to spend on you. Wait until then. It’ll feel so much better anyway.
DON’T Think Your Paycheck is Enough
If you want to be successful in eliminating debt, you have to be aggressive with your payments. Your paycheck won’t cut it. You still need to afford the utilities, groceries, gas, and mortgage. Earn extra money any way you can and put every cent of it towards your debt. Work a side hustle, take surveys online, save your change, enroll in Ebates and earn cash back every time you shop online! (Seriously, Ebates is awesome. I’ve already earned $70 to put towards my debt, and I’ve only been a user for three months!)
Here’s the hard truth. If you want to pay off your debts, you are going to have to sacrifice. And your sacrifice may be different than someone else’s. It may mean having to buy generic-brand groceries, giving up restaurants, selling your car, taking on a second job – you get the point. Before you decide when and how you are going to pay off your debt, figure out how much you’re willing to sacrifice and then commit!
What are some do’s and don’ts you have for eliminating debt? What advice do you have?