Back in 2007, My wife and I had financed a 50 inch plasma television, a mattress, and not to mention large payments on a Toyota Camry and 4-Runner. We wondered why we couldn’t save money. Then the answer hit us in the head like a baseball bat; debt payments were robbing us from saving money. We decided we needed to become debt free. The insanity had to end.
So how do you become debt free? There are several steps to get there. But first, you need to ask yourself why you want to become debt free.
For my wife and I, we wanted to build savings (retirement and purchases) and to be able to give more. In addition, we found out that the Bible has a lot to say about debt and what is said wasn’t positive. If the good book is warning us about the perils of debt, it might be a good idea to start listening.
If you don’t start with the “why” then you can’t get to the “how” or “what.” Why do you want to become debt free?
Once you have the “why” you must do the following steps:
- Prepare and live on a budget. Make a spending plan for your money and track where it goes.
- If you are behind on your bills, then you need to get them paid up. Get a second job, maybe a third.
- Save $1000 for a starter emergency fund. You will need to have a little cash for the unexpected as you pay off your debt.
- Cut up your credit cards and close the accounts. You can’t get out of debt if you keep borrowing money.
- Use the “Debt Snowball.” This has been made popular by Dave Ramsey. List your debts smallest to largest and pay minimum payments on each and take any extra money you can get out of your budget and apply it to the smallest debt. This doesn’t sound logical from a mathematical standpoint, but you need quick wins to make progress and keep you motivated. Math is not the issue, it is your out of control spending that got you into this mess.
Becky and I performed all of these steps and became debt free in one year. After being debt free for several years, I can not imagine going back. Our money isn’t going towards debt payments, it’s going towards purchases, retirement, and giving.
Question: Who else wants to join us and become debt free? Follow @robertjacobs01