Being in debt sucks! Really sucks. Even if you are out and about, the debt is following you on the back of your mind. Either you ignore it and keep making minimum payments or you make a serious plan to do something about it. Let’s be straight-forward here for a second. No one really wants to be in debt for the rest of their lives. You’re paying so much of your hard-earned money to own something or many things by paying someone extra money (hello, interest). Maybe it’s something you need. It may have been compulsive purchases. Either way, they all have the same name: debt!
Most people are consumed with so many types of debt that they don’t realize how much they’re really in. And if you take them all into consideration, they will probably be in debt for the rest of their lives!
The biggest question people ask is: How can I pay off my debt so I can have more of my own money?
My favorite answer: Budget your money!
My Journey to being Debt-Free
Becoming debt free sounds so simple and easy, yet not many people know how to start. It took us 8 years to pay off our debts! It was not the debt that was the problem however, it was job stability, car maintenance, and medical expenses. Both my husband and I were newlyweds, however we failed to plan well financially at the beginning of our marriage. 2 years into our marriage, our first child was born and we were nearly debt free at that time.
However, life had different plans for us. Our 2001 Honda CR-V was not going to last any longer, we ended up getting a new vehicle on payments. On the way, we racked up debts due to job instability as well as medical and dental bills that could not wait. We had our 2nd child in 2017 and we were just about there however, again life had a different plan for us.
2018 was a tough year for us, my husband and I had inevitably separated due to problems in our marriage. It was the year of separation and it taught us how much we really love and cared for one another and our children. Finally, we had gotten back together towards the end of 2018 and we had gotten a fresh start in a new city. We owed $12,000 in 2 car loans and $10,000 in credit card debts at the time. We finally managed to create a budget and increase our income in the new city we moved to and things really started turning around for us. As of early 2020, we are finally debt free!
Here is how we did it:
1. Write down all of your debts & choose a payoff plan.
This is always the most basic step for paying off your debts and keeping track of the balances. What you need to do is include absolutely everything (minus the mortgage, unless it’s part of your current goal) that you owe someone else.
Most people hold massive consumer debts: credit cards, personal loans, student loans, car loans. No matter what debts you have, make a simple debt tracker to include what your debts are (the creditor), the current balance on your statements, the APR, minimum payments, due dates.
I like to track my debts in my planner, but I also enjoy keeping them in a spreadsheet. After searching online for a while, I found a great (FREE!) calculator that keeps track of all debts and helps show you your preferred payoff plan: https://www.vertex42.com/Calculators/debt-reduction-calculator.html
2. Go through a realistic monthly budget.
It sounds like a really easy step, but when you’re just starting this is where the real challenge begins.
The real challenge begins with being realistic. Keep track of your spending habits. What’s an actual necessity and what’s really a want. For example, going on dates with your spouse is always necessary. But do you need to go to a restaurant every other day? Or going to get coffee and breakfast? Do you really need to go on a vacation when you can take the kids to the local beach and pay off another credit card?
Be reasonable and realistic so you can turn your $250 per month dinners into another debt payment! By taking out certain expenses, you can put it towards paying off what you owe someone else which in turn eliminate the minimum payment for that debt. Once it’s all gone, you’ll have a budget that better fits your lifestyle and wallet.
3. Take on an additional job or extra hours.
My husband took on extra hours at his work as well as took on side hustles to be able to put extra money towards the debts. I took on extra projects where and when I raising the kids.
Anything extra you put towards your debt will drastically help you in the end. If you can spend an additional $500 per month to go to debt, work on finding ways to increase that with lowered expenses or increased income. The more you put to your debts, the sooner your payoff date will be!
Post a goal payoff date and you set yourself up for early success. The best way to reach your goals with a visual reminder. So many people absolutely love having charts that show their progress!
You can download some free charts from the lovely Heidi at Debt Free Charts! She has so many to choose from and they are extremely inspiring to pay off your debts or reach your savings goals!
4. Stick to your budget and track your debt payments every month.
Here is where your real challenge lies. Sticking to the plan is where the hard work begins and lies.
If you mark that your family of 4 only needs $600 per month for groceries, stick to it. Don’t use the fact that something is on sale as an excuse to purchase more. Only buy what’s on your list and within your budget.
If you feel comfortable with what you’re eating and want a new challenge, try decreasing the grocery budget. Work around with your budget so it works for you and your family, but keep your debt payments in mind!
I am a strong proponent of weekly budget check-ins because they help keep you on track. This will help you update the end of your monthly budget so you can see how much you overspent on certain categories. While you close out each month, make sure you keep track of the total credits and debits to your debts on your debt trackers!
5. Keep modifying your budget and paying off your debts until your freedom!
Each month is different and has different expenses. When it comes to back-to-school time, you may need to include more money in a category for your child’s school lunches. Or maybe your food budget will be higher with Thanksgiving coming up.
Make sure you are flexible yet realistic with your expenses and income. No matter what happens, you can find money in your budget to pay off your debts. By cancelling your subscription boxes or Spotify Premium, you can help your future self have more money.
Besides, this is only temporary until your debts are gone and you are finally free! Unless you want to work on savings, which is another exciting topic for the future…
I am not a certified financial advisor. All of the information provided is of my own personal experience and suggestions.