How To Change Your Lifestyle To Erase Your Debts
Having multiple debt reduction strategies is the quickest and most effective means of getting out of debt permanently. While there are several ways to reduce or eliminate debt, the best strategies revolve often come from entrepreneurs who have been there themselves and turned their lives around for the better. If you have ever wondered how to how to reduce debt quickly, our collection of 13 entrepreneurs who escaped debt for themselves is guaranteed to inspire and help lead you to success. These debt elimination strategies and debt reduction methods will not only teach you how to become debt free in 5 years or less, but help you to teach others how to quickly get out of debt as well.
The Top 13 Tips For Getting Rid Of Your Debt
The Melbourne Minute
I am all for the latest Apps which are targeted towards Gen Y’s, the electronic card generation. Sometimes it seems as though saving can be so hard, let alone paying down debts which is why its time to embrace new technology! Start a side Hustle: set up yourself a profile with Fiver, Upwork or Airtasker and start picking up some additional work. All of this money should be directed to your debts…before you know it, you will be paying them down in no time!
Start investing….have you heard of Raiz? This amazing tool is connected to your bank account. Every time you make a purchase, a roundup takes place and automatically draws this money from your account into your Raiz app. In three months, I have already saved $250 and haven’t even noticed it! This is a nice chunk of change that you can periodically transfer to your debts…$1000 a year without ever blinking an eyelid!!!
Duncan Law, LLP
I’m sure you will get a lot of different tips on different options but folks should consider bankruptcy as one of those options. Don’t get me wrong, bankruptcy should be closer to the last resort but I cannot tell you how many people have come in to see me who have struggled for years with no real plan or ability to successfully climb their way out of debt. In those situations, bankruptcy could be a viable option that would allow people to
wipe out most, if not all, of their unsecured debts, get current on a house or cars they are past due on, stop lawsuits and alleviate potentially negative consequences from other financially significant events.
Credit Card Insider
Our two recommended strategies for reducing debt quickly is with the debt snowball and avalanche methods:
With the debt snowball method, you’ll pay off your debts in order from
the smallest balance to the largest. Make the minimum payment on all of
your accounts, but pay as much as you can each month toward the account
with the smallest balance.
With the debt avalanche method, you’ll pay off your debts in order from the highest interest rate to the least. Make the minimum payment on all of your accounts, but pay as much as you can each month toward the account with the highest interest rate.
With either method, once the account you’re paying as much as possible
towards is paid off, move onto the next smallest balance or highest
The key to getting rid of debt in the fastest manner possible is to first get an understanding of your current cash flow. How much is coming in versus how much is going out? If necessary, cut expenses that don’t necessarily add value or happiness to your life. Use that extra cash flow towards debt payments.
If you have high-interest debt (north of 10%), consider putting other financial goals such as retirement savings on stall or scaling back in order to put more cash towards debt. Lastly, pay off the highest interest rate debts first, this will result in the fastest paydown time and savings. The key is to automate the pay down, so it’s pushed out of sight and out of mind once you have a strategy in place. Avoid using credit cards if you’re trying to pay them off, and stick to a cash or debit card for a while.
Doing Money Right
7 Steps to Financial Freedom
Who doesn’t want financial freedom? Sadly, most of us are not willing to do much about it. It’s really pretty easy. The College for Financial Planning suggests these 7 steps that you can do!
1. Set measurable financial goals.
This step may be harder than you think. Most of us are not wired to just go “set goals.” Most financial advisors don’t get it. Too many professional advisors still ask “what are your goals”? This question is usually met with a “deer in the headlights” look.
A good financial planning process will include a way for you to determine your goals without simply having to answer this tough question.
2. Understand the effects of each financial decision.
This is the same concept that applies if your doctor tells you to take medication. It is important for them to know about all of your medications because everything may have a counter effect. Your financial decisions can be all interrelated. Don’t make moves without thinking through how your actions might affect other parts of your life.
3. Re-evaluate your financial situation periodically.
I suggest that you update your planning assumptions annually. Check to see if your expense estimate was correct. Look at your actual returns vs. anticipated returns. Decide which projects you want to tackle for the year. Decide if any of your circumstances have changed. A good process and system will have checks and balances in place to make sure you stay on top of your plan.
4. Start planning as soon as you can.
The Chinese have a proverb in the form of two questions. The first is “When is the best time to plant a tree?” The answer is 20 years ago. The second question is “When is the second best time to plant a tree”? You know the answer, don’t you? It is TODAY. Good habits started early can mean the difference in struggling or thriving later in life.
5. Be realistic in your expectations.
When you first create a financial plan you never know what the results will be. In a way, it is a little scary to see how things will look if you don’t make any adjustments. It is a little like getting a test done at the doctor’s office. Some people will actually avoid the test because they are so concerned about hearing bad news.
Just like your health, financial planning is a process and not an overnight event. Focus on the things that you can control and keep a long-term perspective.
6. Consider getting help from a qualified expert.
Just as you would find a specialist to help with your heart, there are times when you need a qualified professional to provide objective financial planning advice.
7. Take charge of your financial life.
Be an active participant. Hiring someone to help you does not mean that you should not stay involved. Quite the opposite! Make sure you provide all of the information needed and ask questions about the recommendations while playing an active role in decision-making. By following these seven steps, you can gain the confidence and clarity that you need for your future. You can employ a team that is on the same side of the table with you and your family to help keep on top of your decisions, the market, and your Financial Life.
I call it Financial Life Management. Would you be interested in talking to me further about financial planning, credit scores, etc.? I am available at short notice to discuss this more if you would like. Feel free to email me at [email protected] or call 281-907-5100.
Kansas Financial Coaching
Find your Why. Discover why you want to get out of debt so that you have
the motivation to stick to your plan.
Use cash as much as possible. Unlike a credit card exchange, where you swipe your card and get it back, you actually give away your cash when you spend it. This creates a loss type feeling in your mind and makes you less likely to make impulse purchases. Anecdote: Until my wife & I used cash at the grocery store, we missed our budget goal for shopping 2 out of every 3 months, even though we tried hard. Now, with cash, we can’t overspend it.
Make a written monthly budget (with your spouse, if you have one) and start with only listing your needs. This is the only real way to know how much money you have to put towards your debts. Start the budget with your needs – housing, utilities, food, and transportation. Then move on to wants. Trim all of the wants that you can so that you can focus on knocking out your debt quickly.
Sell things or cut back so that you can build a $500 – $1000 emergency fund. Put this in a bank that isn’t where you hold your checking account so you don’t see it, but where it is available in the case of a minor emergency. This will put you ahead of at least 40% of Americans
Find a financial accountability partner. Use your spouse, if you have one, or find a friend or coach who is willing to ask hard questions to help you stay on track. Don’t try to keep up with the Jones’. They are all in debt and okay with it. To be different, you have to live differently.
I believe that the best way to get rid of debt is to put together a better way of tracking your spending. It is rather simple, but not many people do it. By tracking your spending, you allow yourself to better understand your habits and pinpoint the things that are getting you into debt in the first place.
By setting a monthly budget moving forward, you allow yourself the ability to set aside savings dedicated to repaying your debt. You will likely have to reduce your current spending, but ignoring your debt can get you into a much bigger hole that can be difficult to get out of.
Your budget should take into account your monthly income, expenses, and the amount you would like to save to help rid you of your debt. By doing this you will be sure to repay your debt in no time and get back to being debt-free.
Lastly, you don’t need to give up on this method once you pay off your debt either. This is a method that you can use to help you better plan for all of life’s financial decisions moving forward.
Getting out debt can be a struggle however, it is possible if you have a strategy in place. Here are our top tips to get rid of debt:
1. START AN EMERGENCY FUND FIRST
Starting an emergency fund is essential to getting out of debt. Why? So you can pay cash for your unexpected expense instead of reaching for your credit card furthering yourself in debt. Start funding an emergency account that you put money in every month until you reach $1,000. You can start with small amounts – even $25 a month can make a difference.
2. PAY OFF THE SMALLEST DEBT FIRST
Paying off debt can get addicting if you do it right. Do not try to pay off your massive student loan as your first debt payoff. Start with your smallest dollar amount so that when you pay off your debt you are excited to tackle the rest. Money has psychological and emotional ties so do what works and pay the smallest first.
3. BUY WHAT YOU VALUE
Most people look at budgeting as cutting things out. Instead, focus on what you love and where you want your money to go each month. Think to yourself Do I really want to be spending money on this?, Do I value this enough to buy? When you change the way you look at budgeting it becomes easier to do.
4. MAKE MORE
At the end of the day, if you are unable to survive on the income you have please explore other options to making earn more money. You can only save so much money when you have bills and expenses that keep piling up. The gig economy is growing and there are many opportunities to switch careers and/or explore freelancing or side hustles. Check in with your local community center for free counseling and career options.
Ko Financial Coaching
Build and live off a budget. It’s the foundation of a good game plan to get
out of debt. Spend less than you make. Use the budget to identify areas you are overspending on and things you spend on monthly that you don’t use anymore or can live without for a period of time. You’re going to need that extra money to do number three.
Use a debt payoff method like the Debt Snowball (made popular by financial expert Dave Ramsey) to strategically pay off your debts smallest to largest. Pay minimum payments on everything and put every last dollar on the lowest debt. Once that is paid, move on to the next one till that’s paid, and so on.
Look for ways to increase your income. That could be things like getting a second job part-time, or working overtime at your current job. Find ways to increase your income or cash flow to throw at your debt. There’s no better time to have a yard sale than when you’re trying to pay off debt.
Gamez Law Firm
Make a Budget – Before you do anything, know how much money you have coming in each month, what your expenses are and how much debt you owe. You can’t do anything unless you take a real, honest look at your finances. Here is a list of the best budgeting apps for 2017or you can make a spreadsheet.
Use the Snowball Method for Paying off Credit Cards. Make a list of all of your debts. Pay off the smallest debts first. Then once the smaller debts are paid off, you can put that money toward paying off your larger debts.
Another option is to Set up a Priority List for Paying Off Debt – To lower your debt you want to pay the debts off first with the highest interest rates. You don’t want to miss a payment on any debt that you owe, but more money should be put toward the debts with the highest interest rates.
Use Cash or Debit Cards – The last thing you want to do is incur more debt when you are trying to save money. Although it’s difficult to do with so much credit available to consumers, I have a simple piece of advice: Don’t spend it if you don’t have it. So if you are trying to get out of debt – this is when you really need to apply that advice. Pay for things with cash or debit cards and keep paying off those credit cards.
Don’t Waste Money – Do you really need that coffee for $6 or a $12 sandwich? All the little things really add up and FAST. If you really need to go shopping, look into second-hand stores. Every time you are about to pull out your wallet to buy something new, STOP and think “do I REALLY need this?”
Take Action to Reduce Your Debt – There are many options to reduce your debt, whether it’s medical debt, payday loans, small business debt, credit card debt or student loan debt. In most cases, I would recommend negotiating a debt settlement to reduce the total amount of debt that you owe. Through a debt settlement, a negotiation is reached with your creditor to reduce the overall amount that you owe. That debt can then be paid off in a lump sum, or over a period of time in a payment plan. Your credit card company would rather receive a reduced amount from you than have you declare bankruptcy and receive nothing.
Don’t Get Social Media Jealousy – We all know we all get a little jealous of our friends’ social media brags. But remember, people only put the good stuff on social media. You see a friend on vacation on Instagram, but do you really know if they dug further into debt paying for it? Avoid getting envious of others and you can avoid debt this summer.
Look for Deals – Don’t spend money on a trip or a dinner, unless you’re sure you’re getting the best deal. And then take a moment and ask yourself if this purchase can wait until you are out of debt.
Side Hustle – Yep, there is that buzzword – “side hustle” creeping up again. But it makes sense, if you really want to pay more money for paying off our debt, you need to bring in more money. A side hustle is a great way how to get out of debt this summer.
Transfer Credit Card Balances if You Can. Some credit card companies, like Chase’s Slate card, offer a 0% interest rate on balance transfers and purchases for 15 months. Transfer your balances on high-interest credit cards to an interest-free (or lower interest) card. Be sure to not close your old credit cards with the high interest though, as this could give your credit score a hit.
Savings should be a long-term solution and habit (initiated at a young age is best), and debt should be a short-term situation. Promising to pay yourself (saving) 10% of your income is vital, you cannot expect to feel or gain wealth when you blow every dime that comes to your pocket. Debt can be eliminated in chunks and should be done consistently regardless of immediate desires (like a Starbucks) or instant gratification (like eating
out or impulsive spending).
Saving does not always need to look like a sacrifice. First, remember there are long-term savings goals and short-term savings goals. A great way to get started for long-term is to see if your employer offers a retirement savings plan that is payroll deducted. The benefits of this is that you can save for the future without even seeing the money leave your bank account. For short-term savings, you can set up your bank account to auto draft a specific dollar amount from your checking to savings on a specific date, just like a regular bill that is auto-drafted.
You can use a third-party app like Digit to help you save each month also. This is a great tool when saving for a trip or something fun that’s a few months out, you will surprise yourself with how much you can save in small increments. You can still go out to dinner and enjoy life, maybe just remind yourself that the $10 movie popcorn or $8 dessert when at dinner would feel better in your bank account instead of in your belly.
O’Neill and Associates
Know how much debt you owe: You should add up all your debt, including credit cards, student loans, mortgage, and auto loans. Knowing how much you owe is the first step towards coming up with a plan to get out of debt.
Budget: You need to be aware of all your monthly expenses. This may include utility bills, gas costs, insurance payments, grocery receipts, restaurant and coffee receipts, etc. Total them up, and separate your expenses into necessary and discretionary expenses. You may be able to cut some or all your discretionary expenses while you pay off your debt. You need to make sure your income will cover all your necessary expenses.
Consolidate your debt: If you owe lots of debt, consolidation is a great way to lower your interest and pay off your debt faster. There are several ways to do this. You can negotiate with your lenders for a lower interest rate, take out a lower interest personal loan to get rid of credit card debt, or even make a balance transfer to a low APR credit card. For student loans, you may be able to refinance a private loan and restructure your federal loan. Credit consolidation companies are also able to assist you and lower your interest rate. Evaluate your financial situation and research your options to make the best decision.
Work side hustles: Any extra income should be used to make larger monthly payments on your debt if you’re looking to get out fast. In addition to a full-time job, consider your skills and see if they can translate into any freelance or side-gigs. This may include writing, driving for Uber/Lyft, selling your clothes, or even renting out a room on Airbnb.
My Bank Tracker
Make a personal commitment to stop the vicious debt cycle you’re currently in. Put this goal on paper to serve as a daily reminder. There is no lack of finance tips and debt reduction advice, but if the discipline isn’t there, you can only go so far.
Keep your credit card in a locked closet and throw away the key. Credit card debt
typically makes up for the majority of an individual’s total liability, not taking into account major expenditures like buying a house. Radically curbing credit card spending is a step in the right direction.
Transfer credit card balances to one with the lowest interest rate. If you have a
huge outstanding balance, switching to one with lower interest rates could save
you thousands in a year.
Whenever possible, pay more than the minimum amount due and on time. Otherwise, you’re simply paying the interest and penalty charges.
Drastically cut back on wants, focus on needs. Practicing better household budget management doesn’t have to be rocket science. Take into account your monthly household income and the expenses that should be taken out. Any excess should go to paying off debt.
Use a financial management tool. There are many free tools to assist in managing finances. While you do actually know how much you have in savings or how deep in the
red you are, sometimes it helps to put it in a consolidated report to give you a better perspective.
Consider debt consolidation and debt management counseling. Loan consolidation allows you to pay these off at lower rates with the convenience of only one due date and amount to think about every month. If you are overextended, some low-cost counseling and consolidation firms can help you work out better terms from your creditors.