Debt is a ball-and-chain that prevents us from living our dream lifestyles. Whether you have a mountain of student loan debt or mounds of credit card debt, the feeling of being shackled to these obligations is a frightful one. Debt can cause stress impacting health and can even complicate relationships.
When we’re in debt it’s hard to take responsibility and easier to push the blame to the creditors for their high interest rates and fees. However, credit isn’t the problem rather it’s our relationship with credit that led to debt.
Debt is the result of our actions.
Now, with that out of the way, it’s also through our own actions that we can take the steps to slowly chip away at the chains and remove that debt ball.
If you’ve been in debt and now living debt-free, I’m sure you can attest to the peace of mind you have as you go about your day. You can sleep better, you’re more relaxed and overall you are a happier person.
5 Steps to Get Out of Debt
You deserve to be happy so take the pre-step right now and say, “I’m taking charge today and will no longer live with debt.” Follow these steps to get out of debt faster and start living without the feeling you’re dragging your feet:
1. Identify the root cause.
Credit isn’t the problem but it’s how we use credit that leads to debt. There’s an underlying reason why we spend the way we spend. You must identify the root cause of overspending, credit usage and debt accumulation.
Imagine your debt as a tree and you want to remove the tree so you can see the sun’s rays. If you only cut down the branches or leaves they will grow again. To keep the tree (debt) from growing back and blocking out the sunlight, you’ll need to remove the root. Once you find out what is perpetuating your debt living, you can now make the necessary changes to cut back, save and pay off debt.
2. Create a detailed list of your income and expenses.
Now, that you have a better idea of the root cause of your debt situation, it’s time to get into the details of your finances. You’ll need to analyze your income sources and expenses. Create two columns and title the first column Income and the second column Expenses.
For the first column write every single source of monthly income you receive (e.g. salary, interests, dividends, part-time jobs, side hustles, etc). On the second column, write down all your expenses or things you spend money on such as rent, food, utilities, shopping, entertainment, etc. Total up the income and subtract the expenses and this will give you the amount that is left over. This is a quick and dirty way to start a budget too.
Once this is completed you will know how much money you have left each month to pay towards debt.
If you determined you don’t have enough, then it’s time to make some serious cuts to your expenses. Decreasing your expenses will do more for you than increasing your income as it will free up extra cash now and decrease the amount of money you need long-term.
3. Prioritize what you “need” and “want.”
I’m all for you getting the things you want just as long as you really love it. However, we must place an emphasis on the basic needs first before spending on the wants. You may want to buy the brand labels over the generic for a number of reasons. Ask yourself if the generic brand can fulfill your actual need.
If you need a car to get to and from work, do you really need a luxury car to meet that need? Chances are you don’t and choosing a least expensive option frees up more of your income to debt repayment.
Cutting back on expenses is putting your long term wellbeing over present temporary satisfaction. But, the priority today should be to pay off debt so you can live more comfortably and spend more time enjoying the things you own with the people you love.
4. Get encouragement and support network.
Debt can be embarrassing but what’s even worse is the stress of having debt. Seek out support from others by reading blogs of those who are also removing the chains of debt.
There are many other resources available that can help you climb out of student loan debt or credit card debt. There is a resource such as ReadyforZero that wants you at debt zero. For our friends across the pond, I learned of Satsuma debt support that has useful resource tools for free money advice and support.
You can also speak with family and friends and get the support from within your inner circle. We’re getting to a point that money is no longer a social taboo and we all have stories to tell. Listen to their stories because it could help you find the right strategy to pay off debt sooner.
5. Stay positive and believe.
It’s hard to think positively when there is that mountain of debt. Stay positive and believe that the light you’re seeing in the tunnel isn’t a train heading towards you but it’s the light at the end. The light is getting brighter because you’re walking the path to get yourself out of that dark debt tunnel.
Work on having a positive mindset. It’s crucial in order to tackle debt head on. Research has shown that positive thinking has an effect that can lead people to overcome tough challenges.
In conclusion, debt can be overcome with the right mindset, a growing awareness and through tough choices. So remember to identify the root causes, check your spending habits, adjust your spending, get support and believe in yourself to reaching this financial goal.
Good luck debt freedom fighters!
Want to keep yourself from reattaching the debt ball and chain? Remove the shackles once and for all by releasing yourself from credit usage.