You’re doing it! You’re finally sick and tired of owing other people money and you’re ready to start kicking debt.
But, how can you do it and set yourself up for success?
Check out these 5 steps to getting out of debt successfully.
Step 1 – Know How Much Debt You?re Really In
Go through all of your credit cards, your cars, your student loans, your house, your payday loans, whatever else you borrowed money for. Write down the following information on each debt:
- Debt Name
- Current Balance
- Minimum Payment
- Interest Rate
You can use a spreadsheet or check out this handy tool from udebt.it.
Step 2 – Cancel Anything Unnecessary
Have a $200 cable subscription? Not anymore.
Do you spend $500 a month eating out? Maybe before you started kicking debt.
Do you get your nails done every week? Do it yourself (before you say THATS HARSH STEVEO – My wife was going almost weekly before we started this journey. She hasn?t stepped into a nail salon since. If she can do it, YOU can do it).
Step 3 – Start a Zero-Based Budget
A zero-based budget is the key to getting out of debt. Without a budget, you don?t know where your money is going or how much you have left over each month.
The first time you do a budget, it will be an eye-opener. Chances are, you?ll under-budget on almost every category.
Think you only spend $200 on groceries? It?s probably closer to $300.
Think you spend $50 on your pet fido? It?s probably closer to $100.
Obviously, every situation is different, but I can pretty much guarantee that you won?t get the budget perfect for the first few months of doing it.
I created a free budget for anyone to use here. I would also highly recommend you check out You Need a Budget, which is what I personally use.
Step 4 – Stop Using Credit Cards (or use them correctly)
I can hear some of you now?. But Steveo! I know how to manage my credit card and always pay it off!
I hear you, and honestly, I use a credit card too for almost everything.
BUT – I didn?t at first.
When I first started this journey, I found that even with a budget, I was overspending with my credit card. Yes, I paid it off in full every check, but I was buying things that I didn?t need.
So, UNTIL I curbed that itch and was really strict with myself, I used cash. You know – that green stuff that people used to have in their wallets.
A big part of how I curbed the issue is by using YNAB. It is by far the best budgeting tool, especially if you use credit cards.
If you?re finding yourself spending more than you have budgeted, STOP USING YOUR CREDIT CARD. You will fail, and we don?t want that.
Step 5 – Have Fun
Here?s something that a lot of people don?t tell you to do when trying to get out of debt. Have SOME fun, even if that means you may spend money.
WHAT?!?!?!
Yes. You heard me. Have fun from time to time. Have a date night. Rent that movie you wanted to see. Spend $10 on a concert you want to go to.
The point is that you can?t be miserable. If you can?t do anything you love, you will fail. This journey may take you a few months, or it may take you a few years. Not going on a date or seeing a movie in 3 years would set you up for failure.
Now, I?m not saying go have a $100 steak dinner. Be sensible and do fun things that don?t cost a lot of money. Also, MAKE SURE YOU BUDGET FOR IT. If it isn?t in the budget, you need to hold off and do it when it is.
