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“I need to get out of debt.”
How often have you resolved to get out of debt?
Did you happen to decide to get out of debt this year, last year, last week? If so, that’s great news. But the real test is in the implementation.
With over47% of Americans vowing to make changes to improve their financial situation, most will be looking for strategies and tips to make it happen.
How do you not only keep your commitment to getting out of debt but follow through with your plan?
Table of Contents
Five Steps To Create AGet Out Of Debt Strategy
1. Get Your Head On Straight
Changing your financial circ*mstances takes a particular mindset.
For those of you who have overspent and overcharged, failed to save or invest, or don’t know where your money goes, rebooting your brain takes patience and a certain degree of kindness towards oneself. To think you can suddenly, with a little forethought, go from overspending to not spending at all is ludicrous.
Changing your mindset takes an absolute realization that you have a problem; a problem that you find worth investing time, resources and energy into changing.
Without this realization, you won’t get very far in your goal to change your circ*mstances. It’s no different from the dieter who comes to understand their overeating is destructive to their health.
Before you attempt to revamp your finances, make sure your mindset is supporting you towards your goal of getting out of debt.
Read: There’s No Magic Bullet To Getting Out of Debt
2. Track Your Spending
The majority of people who are struggling with debt aren’table to accurately identify where their money goes each month. The money comes in, and it goes out, with little connection to what they’re spending or bills they’re paying.
If this sounds like you, then I encourage you to start tracking your spending. I’ve developed one you can use or just use a notebook and pen.
Tracking your spending is such a crucial step to changing your money situation. Tracking will allow you to see where you can make changes in your spending habits. Without this knowledge, it will be harder to see where change needs to occur.
For example, if you want to save for a house and at the end of the month you have no money available to put into savings, then the plan fails. Ifon the other hand, you take the time to scrutinize your spending habits, you discover areas where you can cut back to fund the house you dream of owning.
Read: How To Love Your Money: Managing Debt
3. Convert To Cash
If you really want to make a dent in your debt you’ve got to tear up the credit and debit cards and convert to cash.
Using the cash only system when paying off debt provides a useful opportunity to reconnect with money in a way that’s impossible when you’re using plastic.
Just like the casino that trades your money for plastic, so is the credit card company who hands you a charge card. It’s almost impossible to stay on track.
Spending money gives you an emotional response and the one you get from plastic is very different than the one you get when using real money.
Get rid of the plastic and convert to cash.
Read: Why Using Cash Only Is Crucial When Getting Out of Debt
4. Save Your Way Out of Debt
The best way to end the debt cycle is to save your way out of it.
By working on building your emergency savings while you are paying off the debt, it helps to ensure when the next emergency comes up (and we know it will) you’ll have an adequate amount of money tucked aside to pay for the issue.
Without this reserve, you’ll always revert to credit cards and will never get out of debt.
Read:The 6 Steps To Saving As A Means Of Getting Out Of Debt
5. Vow To Get Out of Debt
[tweetthis]Debt is like an anchor weighing you down and keeping you in the same spot.[/tweetthis]
Get rid of the debt, and the anchor goes away soyou can move towards a new financial situation — one that you have created and designed according to your values, needs and wants.
Getting out of debt works best with a change in mindset, an understanding of your spending and the promise to get out of debt once and for all.
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