5 Tips to Break Free From Debt
It was a bright Spring day in 2015 when the course of my life would change for good. On that day, I made one single, monumental phone call as more than 50 of my closest friends and family listened intently. This phone call was to JP Morgan Chase and involved making a payment of $123 on my car loan. The lady on the other end processed my transaction seamlessly, as I’m sure she was accustomed to doing. But what she was probably not prepared for was for a huge eruption of joyous celebration and clamorous applause to ensue. What my Customer Service Rep didn’t realize was that she had just ushered me into becoming Debt Free—on speaker, in front of a listening audience! For this was the day I had gathered everyone I cared about, and celebrated this milestone in my life, in style!
Not everyone has to throw a full blown ‘Debt Freedom Celebration & Equipping Party’ like I did when I crossed that finish line. However, I really think that recognizing how powerful, achievable, and liberating it is to pay off your debt, is paramount for anyone who wants to live to their full potential.
Debt is a killer. It has murdered more dreams and aspirations than any thug, police officer, or lay rifle-bearer ever could. And yet every day, people walk into its trap like it’s an old friend they’re in love with!
DID YOU KNOW?
- 55% of Americans either break even or live above their means–meaning they either spend every penny they make or spend more than they make through the use of debt.
- Did you also know, one American who has zero debt and $10 bucks in their pocket is wealthier than 25% of the U.S. population?
- Finally, did you know that our consumer debt levels in American have reached over 11.52 Trillion dollars as of 2014?
It is alarming to say the least. But my goal is not to harp on the problem but instead to bridge the gap on how YOU can separate yourself from the pack by truly BREAKING FREE!
It’s time to stop letting your financial limitations and addiction to having what you want, when you want it—control your destiny.
And because I am passionate about this subject, I have compiled a list of my Top 5 Tips on What it will Take to get out of Debt while sharing personal anecdotes on how I did it too.
TIP # 1: REDEFINE NORMAL
Hands down, the number 1 thing you can do to be successful on this debt-free journey is to change your way of thinking. If you’ve bought into the narrative that debt is simply a part of life, you need to guess again.
“Your captures have decorated your prison cells like castles and have convinced you that your crumbs are a feast.” –Anonymous
Open your eyes. Consumer debt is not okay and should make you uncomfortable and angry.
If you really want to be free, you can no longer call it acceptable to mindlessly charge your credit card to buy things you don’t need, with money you don’t have, to impress people you don’t even like. Instead, you need to decide that you’ll never spend another dollar before you actually HAVE it. Can you imagine a life like that? You should.
Breaking the cycle means deciding that ‘keeping up with the Jones’ isn’t for you anymore and that until you pay off this money, you are a slave to the lender. It’s that serious.
In this same breath, I want you to see HOPE calling your name. There is a new normal–a different, better way of living available to you that involves having enough money to do what you want without having to spend every paycheck paying off creditors.
If you don’t believe life like this is possible, just ask any of my growing number of friends who have collectively paid off hundreds of thousands of dollars in consumer debt and are now able to focus their attention on what matters to them. For some, it’s building wealth. For others, it’s becoming missionaries with no financial obligations. Still for others, it means using their money to pay for vacations and travel the world. The bottom line is that they are no longer held back financially from going after their dreams.
I had to go through this same process. Although I was able to fund more than $70,000 worth of college expenses through scholarships, I still found myself bogged down by car payments and credit card payments. But one day when I stumbled upon a “Debt Freedom Scream” similar to this one, it ignited a fire in me to break free. Thankfully, I finally did. However, understand that our battle to live differently never stops.
To this day, I still find myself having to say no to buying things that I really, really want because I don’t yet have the money. Even if “I get paid next week”, I do my best to stand by my convictions and only buy those things when I’ve saved and have the cash to pay for it. This kind of living will blow your mind!
TIP # 2: GET ON A SPENDING PLAN
If you think you are going to get out of debt without creating some kind of system to manage your money, you’re only kidding yourself. People get so afraid of the ‘B’ word (B-b-b-BUDGET!) that they throw their hands up in the air and spend frivolously. But then at the end of the month when their major bills are due, they freak out and borrow more money.
This cycle needs to stop. Instead of playing the guessing game of hoping every swipe goes through, sit down at the beginning of each month and tell your money what to do!
All it involves is writing out what you expect to make, what you expect to spend and on what, then doing your best to stick as close to it as possible. That’s it! Some people may use an app, others may write it on paper, others still may create a budget in Excel (like I did). Regardless of how you do it, the point is to just get closely involved with your finances and plan what you’re gonna do with it. Then do it!
At the beginning of my debt-freedom journey, this was difficult for me to do because it was new. But as time went on, I actually fell in LOVE with budgeting! Being aware of what I had and what it was for, became fun. The main spending categories I wrote out were for bills, giving, saving, and miscellaneous items. My favorite categories were my giving and miscellaneous ones. That’s because when it came to giving, I always knew that whether a birthday came or if I saw a homeless man on the street, I would be able to give because I had already made provision for it. I didn’t have to worry about spending money needed for bills. My second favorite category was my miscellaneous section where I’d budget about $100 to do whatever I wanted with! That’s what I used to hang out with friends, shop for clothes, or get my hair did! ;-P
Try it! Put your hands to the plow and begin to see your budget as a tool that empowers you versus something that restricts you.
(For more resources on budgeting, click here)
TIP # 3: CREATE A SMALL CUSHION
In order to break the cycle of being forced to borrow more money whenever a curve ball comes your way, I recommend saving at least $500 in the bank. You’re literally creating an emergency fund.
Many of us have been brainwashed to think that credit cards are the answer to emergencies. But that’s the biggest lie in the book! Credit cards are the answer for creditors who make a profit on every dollar you borrow called interest! Wake up, stop borrowing, and create your OWN emergency net, where you don’t have to pay anyone else back!
Although it’s tempting to skip this step on your journey to debt freedom, this step is critical! Emergencies are inevitable and so your best defense against being forced to swipe that CC is to have money cheering you on in your savings account saying, “Don’t worry honey! I got you! If you slip up or something happens, I’m here for you!”
I can’t tell you how many times this step helped me stay the course when unexpected expenses arose. In the approximate 2 years that it took me to pay off more than $20,000 of debt, I had at least 5 to 7 situations where I had to dip into my emergency fund. Whenever I did, I would replenish it right away. The cool thing about it, though, is that each emergency didn’t require me to take steps backwards in my pursuit to break free. Saving literally saved me from increasing my debt levels while trying to bring them down.
TIP # 4: PAY IT OFF LIKE YOUR LIFE DEPENDED ON IT!
Once you know how much you have to work with and have a small cushion in the bank, it’s time for you to pay off your debt with a fervency that comes from your core!
You can’t patty cake your way to paying off your debt. You have to get angry at your debt and put every extra dollar you can squeeze into it. Make your own coffee. Eat in instead of getting take out. Cut the cable. Sell the car. Rent the room. Listen to the radio instead of subscribing to those music apps. Trust me–you’d be surprised how much those little changes will free up excess cash that you can put toward your loan in addition to the payments you make.
It’s at this point that I want to warn you that people may think you’re crazy! They will call you cheap, unrealistic, and boring! But as my FAVORITE personal finance coach, Dave Ramsey, puts it, “In order to live like no one else, you need to live like no one else.” Make the sacrifices, cut the spending, and make big payments that tackle your debt hard core!
When it comes to the best approach on tackling your debt, I recommend something that Dave Ramsey calls the “Debt Snowball”. This approach pretty much says you tackle your debt by focusing your energy on your smallest debt first. Once that is paid off, you move those funds to the next smallest, and then so on and so forth.
(Click HERE to watch a video that shows how this process works)
When I was paying my debt off, I had to say no to so many parties, had to get creative about gifts to people, and ate on a super tight budget for months on end. It finally paid off and afforded me freedom like I never knew was possible. In fact, shortly after paying off my debt, I was able to smoothly transition out of my job to focus on school and starting by own business–funded by 6 months of savings in my bank account! The sky’s the limit for me now.
TIP # 5: GIVE YOURSELF SOME GRACE
My final tip for your journey is to remember to give yourself grace. Obtaining financial freedom is a marathon and not a sprint. So sometimes you will take backward steps before you can fully move forward. But that’s okay.They say failure isn’t failure until you give up and that couldn’t be truer. As long as you keep pushing (and I’m speaking to myself too), you don’t have to look at setbacks as the final answer. Even for those of you who were debt free before and are on your journey to being debt free again, welcome back!
Another thing to remember is that your wellbeing is more important than what is or isn’t in your bank account. What I mean by this is don’t make a payment that will mean you can’t eat or that you don’t spend time with your family. I am never an advocate for doing anything that will compromise your ability to meet your basic needs nor ones that will steal memories you can’t get back.
Simply know that although you’re going after this with all you’ve got, your debt does not define you. By simply making the decision to live a different way, you will find that you will attract people, things, and resources that will help you on your path.
Keep your head up, keep pushing, and enjoy the ride!
In my next few blogs, I will go into detail about how exactly to create a budget, how to fund your college education with other people’s money, and how to begin winning with money all around.
For now, I leave you with this really cool song on debt freedom that I found. Imagine you singing this one day and celebrating with thousands of people across their new found freedom too!