Debt freedom is only 4 simple steps away. Now I said simple not easy. I know that Expert just told you to pull out your credit card and buy the next big shiny object. He just told you to believe in yourself and spend $995. The super-duper business kit and $150 auto-ship is the key to millions. Just charge it.
That new flat screen is calling. 0% interest for 18 months. It looks good at 70 inches and it curves. How about a new car? You just paid this one-off but it’s 5 years old and the new car has more lights. The payments are about the same… what is another 5 years paying off another car? You look good in a depreciating asset.
Cash is King
The tough thing about debt freedom is you want to use cash. When you use cash you feel it more. Your brain registers cash leaving your hand. You don’t feel it when you use your debit or credit cards. Just try it and see. Dropping $995 cash on a business opportunity, $4000 on a flat screen, or $25000 cash for a new car will have you investigating your purchases more.
Paying cash will have you work that new business more diligently. Being stuck with business debt and all the crappy products that come with it is a pain. I am not going to get into a debate about good debt vs. bad debt. I rather you bootstrap your way to success. If you knew how to use debt you wouldn’t be reading this article.
Investing cash into your business and purchases makes you more cautious. It produces delayed gratification and in the end, you get better deals because you brought cash to the table. I have bought furniture, electronics, and cars with cash, and saved hundreds even thousands of dollars. Cash Is King.
Debts can kill your business, destroy your marriage, and cause friendships to disappear. You don’t need the stress and frustrations that come with owning credit cards, banks, and personal loans. Here are 4 Simple Debt Freedom Solutions.
4 Simple Debt Freedom Solutions
Pay More Than The Minimum
Stop the habit of only paying the minimum. Your statements show you how long it will take you to pay off your credit cards or loans when you pay the minimum. This only prolongs the agony and you are spending more money. Interest payments equals cash flow for your lenders. That’s how they make money.
Bite the bullet and pay more. If your minimum payment is $50 pay $100. If it is $100 pay $200. Get rid of it. The money is there. Stop eating out, tell 7-Eleven you are on vacation, and stop all the bad habits of smoking, drinking, or gambling. Smokers can save on average $35 per week if they stop smoking.
Sacrifice is the keyword here. If you have more months at the end of your money you need a cashflow plan. Financial Peace University teaches you how to create a monthly budget. A budget will help you know where your money is going.
The increased payments will save you more money, time, and frustration. Better to live below your means now than fear living hand to mouth in the future.
Snowball Effect
I got this from FPU. List all of your debts in order from the smallest debt to the largest debt. Next to each debt list the monthly payments.
Don’t worry about who has the highest interest rate. We want something simple. You want quick victories to build momentum. Paying off the smallest debt first will create energy and motivation for you. Seeing progress is the only way you will keep going.
The second part of the snowball effect is to come up with an extra $100 to $200 per month to add to your debt payments. Cut back on expenses, get a second job, and sell all that stuff you don’t use. Sell so much stuff the kids think they are next. You will find the money hidden in your credit card and bank statements. Go through them and cut expenses you don’t need.
Apply your extra money to the first debt listed. When that debt is paid off, apply that money to the second debt. For example, you came up with $200 extra. Plus the monthly payment of the first debt of $15. That is a total payment of $215. Now you apply $215 to the monthly payment of the second debt which is $25. Your total payments are now $240. Keep up this process until all your debts are paid. Hence the snowball effect.
Cash Out Your Savings
Cash out your savings. It doesn’t make sense to save at 1% interest and have debt at 18% interest. You will never win that battle. Cash out all of your savings. Leave $1000 in an emergency fund and use that cash to help your debt freedom plan. Trust me on this when you are debt-free you will have enough money to fund your savings plan.
Get A Second Job
The goal is debt freedom, right? Then get a second job or find another income source. Imagine putting an extra $1000-$1500 per month into your debt snowball. How fast could you pay off your car loan, student loan, and those darn credit cards? Have a long-term perspective. It could take 3 to 5 years to become debt-free.
Notice I didn’t say file bankruptcy, take out a home equity loan or borrow against your 401(k). Getting into more debt to pay off debt is not smart and just a marketing ploy. It took me 28 months to become debt-free and now I put my debt payments into what I call my Debt Freedom Fund. My total debt payments were $1100.
Change Your Behavior
These solutions are simple, not easy. Combine all four. That’s what I did. But before you start realize that your current behavior has you in this situation. Keeping this same behavior will only have you pay off your debts and then go back into bondage. There are plenty of books and courses on how to handle your money.
Getting into debt did not happen overnight. Neither will be becoming debt-free. Start now and remain consistent.
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