How to get out of debt fast!
So many people are struggling with debt and I wanted to share my easy to follow guide to get out of debt fast!
Step 1) Make a decision
Be strong! You got this! This step is where most people want to quit because it seems like your debt is so much more than what you bring home. I understand the fear and the regret and the overwhelming feeling.
But can I tell you something? You can do anything you set your mind to. Anything means anything and getting out of debt falls under that!!!
If you skipped over the money mindset chapter then you need to go back and watch that first.
What I won’t let you do, is quit. Why? Because you are here for a reason and I will keep you accountable. You owe this to yourself. You are more than able. I want you to close your eyes and just think for a moment. Walk me through what you will be able to do and focus your energy on once you are free from this debt. Once you no longer feel stressed while you are at work, while you are driving, while you eat your next meal, while you chat with your spouse or your friends.
Listen there is a reason why money is the number one cause of divorce and lack of focus at work.
I say this every day and I will tell you right now, I am not passionate about money. I am not passionate about the stock market. I’m just not, thats not what makes me get up in the morning. What does make me excited to wake up every morning is knowing that God called me to do more than just exist, knowing that there is a calling on my life to speak truth and motivate people to live a life that makes this world better. A life that gives space for us to take an afternoon and help someone who is in need or spend that extra hour with your kids or have a relaxed conversation with your friends instead of always being worried about how much money is in your bank account.
See there has been a lot that has changed in our world that has left no room for community. No room for us to enjoy the simple things in life. If you don’t have the latest and greatest item you feel like you are missing out. Can I challenge you today? Will you allow me to show you that there is so much more to life than items that are just draining your money and your energy?
What would you do if you realized and that you could actually work a job that is closer to home but pays 10k less a year? That’s what financial freedom is. Freedom to make choices that are best for you and your family. That doesn’t mean that you can't have what you like. But if you are currently in debt and lack the finances to do so, then NO you will not be able to get a new car because you don’t currently have that choice.
I will also teach you that some things are just STUPID to spend money on. You don't need to spend thousands of money on certain gadgets because that’s just STUPID. You don’t need it. You won’t be better for it. No one will think more or less highly of you because of it.
You are in control of your money. Make a decision NOW that you WILL get out of debt. It might take you a few years but you know what? It will teach you more than you can imagine. To be determined, patient, understanding, non judgmental, and eventually- financially free!!!
Are you in?
Step 2) Debt avalanche!
Alright this step is simple but the most important step. Now that you have all of your debts in front of you, I want you to list all of those debts from smallest to largest on an excel spreadsheet or a notebook/piece of paper.
Get them all on there.
One you have all of the debts listed with the name of where it’s coming from and the totals next to it. I want you to add the minimum payments on the right side of the total balance of each debt you owe. I now want you to add another column to the right of minimum payments and add $10 to each minimum payment. This strategy is a combination of Dave Ramsey’s debt snowball and Suze Ormans. I like both of their strategies so I used some of both to make my very own Debt Avalanche strategy! Every time you pay off the smallest debt, you add the monthly payment (Minimum payment +$10) that you just paid off, to the next smallest debt’s monthly payment. I know that’s a mouth full but it’s very simple.
if you use to pay $60 ($50min. payment + $10) to your smallest debt and pay that debt off completely, now you add $60 to the next monthly payment of the new “smallest debt.” So maybe your next smallest debt had a monthly payment of $75 ($65 + $10), well now you would pay $135 ($60+$75) instead of $75 towards that debt until you pay that one off.
We can now focus on paying the smallest debts first and working our way down the list.
Step 3) Create a goal based timeline
Who doesn't love goal setting?? I love setting goals and you know what, putting a timeline attached to those goals make it all that much more doable. You know why??? Because you know when around what time you can start celebrating!!! I love Jesus and I love me some parties and celebrations! I am rowdy. I am a Latina after all so maybe that’s just part of my DNA but man do I like to set goals because I like the reward- more about that in lesson 9!
Here is how I want you to do this. Please use your calendar while doing this. I need you to take the debt list.
Next you will take a look at your “debt repayment category” on the budget. I want you to multiply that debt repayment dollar amount by 12. We are working on a year by year basis.
Now that you have the total dollar amount that will be going to debt repayment for the year you can start subtracting the debts starting at the top of your debt list. Smallest first then you keep subtracting. As you do that, you will simply make a note on your calendar around the date that you are supposed to pay off each debt.
DO this until you are done for the given year and you get to ZERO :) You will repeat this next year or if you have a big change in income or expenses so you can adjust your debt repayment dollar amount.
DO NOT send more money on a discretionary expense if more money becomes available throughout the year!!
Step 4) No extra spending
That leads us right in to the next lesson. DO NOT spend extra money because you feel like you can. Friend if you think you have extra cash to splurge at any point before you are done paying all your debt you are mistaken!! Don’t do it. Why? I am not trying to be mean here but you are a slave to your lenders until you no longer owe them anything.
The bottom line is that you are not responsible for the expectations that others have of you. You don’t have to say yes to things just because you feel obligated to if means you have to spend money on it.
Everyone will still love you if you even if you can’t throw them a big birthday party, or buy them a new pair of shoes. Trust me, if they have a problem because you can’t spend money on them then they need to get help and they need to get a reality check.
I am not talking about generosity here. However, you are working on getting out of debt for a reason and it might be more wise for you to be generous with your time during this season because honestly you can only be generous with your money when you have enough to pay your bills and then some. YOU WILL GET THERE!!!!
It’s time to stop over spending and pleasing people that don’t even matter! Opinions might be hurtful but you can’t control what others think of you!!!! It is irrelevant to your success so please hear me on this.
Step 5) Celebrate your wins
Didn’t I tell you I like to party? Well I do!!!! It’s true. I love having a good time. I can’t help it. That’s why I believe in celebrating your wins.
This is the fun part of this whole thing!!!
One of the best way to celebrate your wins is by making a public announcement. Whether that is online or within your community. You know why? Because you are making a public declaration that you are on this road to freedom and you are committed to it.
You not only feel good NOW about your success but you are helping others around you look at their situation and know that they are not alone. They don’t have to keep up- at least not with you and maybe it will even bring you closer together.
All of us like to feel like we have something in common wit others. Specially when it comes to money because if this weren’t true- we wouldn’t “always be trying to keep up with the Jonas’”
So celebrate your wins!
I hope this helps you on your road to becoming debt free! If you have any questions you can find me on insta @inversionista_school or you can always email me!