The Steps to get out of debt is currently one of the most discussed topics in the financial world. Debt is all around us in the 21st century. We have car debt, student loan debt, credit card debt, home debt, the list goes on and on.
A common question I get asked is, “Why do I need to get out of debt? I’m making my payments every month.” Here is my answer to that question. You are getting RIPPED OFF. The companies don’t mind giving you $6,000 because they know when you return it to them over 3 years it’s going to be $11,000.
Interest is defined as “The price of money”. Think of it as a convenience fee for being given money you haven’t earned yet.
Believe it or not, interest isn’t even my biggest problem with being in debt. My biggest issue with it is the making monthly payments part.
You are giving up your income to these banks and financial institutions. This is money you could use investing, going on vacation, preparing for the future.
The average car payment in the United States is $550/month. If you invest the money in a steady growing mutual fund over 30 years that $3,300,000. That the price you are paying to own a car you couldn’t yet pay for in full.
Enough blabbering on and on. Here are 7 steps to get out of Debt Fast.
Be Ready for Change
I am not going to lie to you, this is going to suck. You are going to live a few years like crap so that you can live the rest of your life differently. Working on these steps to get out of debt is going to be hard but totally worth it.
Are you ready to dramatically change your life? If the answer is no, the article is not for you.
Stop the Bleeding
You need to stop the source of the problem. Obviously, if the problem is student loan debt or a car loan, there is nothing to be done. If any portion of your debt is coming from credit cards, it’s time to cut those puppies up.
Prevent the situation from getting worse.
Get Organized
You need to start thinking of your debt as a monster that needs to get attacked. Get all of your loans/debts on a piece of paper in order from smallest to largest (Not including your home).
The reason for this step is that many people have the misconception that they are going to be in debt for the rest of their lives. The purpose of this article is to demonstrate that getting out of debt is not just possible, its doable.
Once you get all of your debts from smallest to largest take a look at them. Your smallest ones are probably a credit card with like $38.17 or something and your largest is probably a car or student loans.
Create a Budget
This is probably the most difficult step on this list
Creating a weekly budget means detailing where every penny you make is going to go before you even make it.
Here is an example of a weekly budget,
Income: $3,000
Groceries: $200
Mortgage: $1,000
Utilities: $150
Going out $100
Debts/Loans: $1,550
My budget looked very similar to this after college when I was trying to pay off my student loan and car debt.
Cut Down your Expenses
Minimize everything. Every penny you save in one column you can add to the “Debts/Loans” column.
This is where most people realized that getting out of debt is too hard for them. They aren't willing to sacrifice Friday night nights at the bar yet. They aren't willing to sacrifice cable yet. This guide is for people who are serious.
This is what I meant by prepare for your life to change. You are not going to see the inside of a restaurant for a while. You will not be going on vacation anytime soon. Look at your budget and see what can you cut down on.
Increase income
You can only cut so many things out of your budget. You may need to increase your income to tackle this debt head-on. Remember that after changing your income you may need to go back to some of the other steps to get out of debt.
There are a few ways you can do this that I recommend
Get more hours at your current job.
Pick up a side gig (Example: Uber)
Pick up a second job.
Start making money online
Here is a link to our guide on how to Make Money Online Today.
Sell Everything
Have a big yard sale. My mentor had a great quote when discussing how to get out of debt. “Sell so many things the kids think they’re next.”
You’re going to be working so much you won’t have time to watch tv anyway, sell it.
Everything you make from the yard sale should be thrown immediately on top of the debt.
After doing step 5 and 6 you are going to need to redo your budget. Redo your budget and stick with it. It is your financial bible now.
My get out of debt mentor is Dave Rasmy Commonly known for his radio station. This man changed my life and I am hoping I can do the same for you.
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