The Importance of Being Debt Free and How to Do It
Debt free? Does it seem like second nature or a pipe dream? I find people usually fall into one of those camps when I start talking about the importance of being debt free. Let me tell you I was a “pipe dream” person for a long time. But I am now a believer! Once you catch the vision of living a debt free life you’ll become single-minded to the task; and it WILL happen.
So maybe you’re still in the camp of building credit is good or a little debt is ok as long as you’re making your payments. No. Debt is a master and you become its servant in bondage; and even a little debt shouldn’t be your master. But let me tell you being without debt is FREEDOM! When you live a life without debt your money works for you in a whole new way and Mr. Credit Card holds no power over your life anymore. And frankly, debt is stressful. After my husband’s 3rd layoff I began to realize that debt was downright scary when we had to feed a family on our savings and unemployment.
So just how to do you get debt free? You start be developing some new habits. These aren’t hard, this isn’t get a 3rd job stuff; but they still may sting a bit. Let’s get to it!
Habits That Will Get You Debt Free
- Get Everyone on the Same Page
You, your spouse, your kids…everyone needs to get on the same page about cutting the debt out of your life. This is ESSENTIAL to making the changes you’ll be implementing. Start with a family meeting and present your facts and plan. It helps for everyone to see the benefits too; like a vacation, moving to a new homestead, etc.
- Determine Your Goals and Write Them Down
When you are traveling you have a map (even if it’s on your phone). Same with getting debt free – you need a plan that gives you a destination. So write down your goals; it will help when you’re tempted to spend money you shouldn’t or whip out a card.
- Change Your Mindset
I think 90% of the time when we buy “things” they are just a want vs a true need. You don’t need a soda from the fast food place…you want it. You don’t need go out to eat because you’re busy…you didn’t plan well. You need to change your mindset about what you truly need (food, housing, utilities, getting around) and what you just plain want out of convenience at the moment.
- Become One with Your Thrifty Side
Learn to shop used when you truly need clothes or any other items. Shop yard sales, thrift stores, Craigslist – anything is better than retail.
- Make a Dent by Selling Stuff
Get rid of the things you really don’t need and put that money in your emergency fund (minimum $1000) and then start applying it to your debt. Yard sales, Facebook sales groups and Craigslist are great because you don’t have to give some of your profit away. But Amazon, Ebay and Etsy can be great contenders for more specialized or higher-ticket items. Speaking of which…are you ready to part with bigger items like cars or even houses? If you’re making payments on a car that you can sell and pay off that then do it. Then pay cash for a car, Uber or bus it! We had been renting out our former house in Texas because we couldn’t sell it when my husband got transferred to Arizona. But after 7 years the house was finally worth more than we owed and BOOM we sold it; every cent of the profit went to our debt. Start small but think BIG!
- Start Tracking Your Spending
Consider investing in some software like Quicken to track your spending habits. This is a great tool for looking for wasteful spending! But don’t buy the software if you don’t have the cash for it! You can also make up a spreadsheet for free; though more time consuming.
- Get Aggressive!
Learn to say no when you don’t have the cash. Be mindful that relationships are not built with stuff…focus on people. You want to get brutal? Cut cable, even Netflix…no fluff! Unplug unused appliances like toasters, blenders, etc because they use electricity even when they aren’t in use. Cut your own hair or at least get it done less. Don’t be afraid of being called cheap…look at it as a compliment. Downgrade your cell phone and service. Focus on it being a season in your life, a means to an end of debt. Then when your debt is paid off you can decide what you want to bring back into your life. You may find that you no longer desire the same things and want to use your money for different goals.
- Birds of a Feather…Save Together
Find some like-minded friends. You can encourage each other in this process. It is also nice to have someone else to get together with that will understand that you’re staying in to play board games instead of dinner and a movie.
- Cut the Cards and Close the Accounts
Look I know that people are going to tell you that closing credit accounts is going to hurt your credit but CASH talks. Don’t believe me? See Dave Ramsey’s Q&A about credit cards. You need to close them NOW…yes before you pay them off.
- Make a List of Your Debts
This list should be from smallest to largest. List it all: credit cards, personal loans, student loans, cars, homes…everything you owe to someone else. Now you can employ the Snowball Method to pay off your debts.
- Don’t Lose Hope Midway!
Depending on how much debt you have, this could be a long journey. When you feel yourself or your family slipping back into old habits bring out the goals and refocus! It couldn’t hurt to keep a journal during this time to reflect on how life improves and the blessings you receive because of your new priorities. Excuse the cliche, but keep your eyes on the prize of a debt free life; where opportunities are open to you like they never could have been in bondage.