Ideas & Steps to Get Out of Debt

Debt Relief, Savings Plans / By

As we all know, life can be complicated, and managing finances can, at times, be difficult. The modern world actually forces us to leverage debt to increase our chances of success. Credit monitoring bureaus track and trace our every financial decision, and assign each of us a score that reflects our credit worthiness. Debt is not necessarily a bad thing, but in most cases, for many people, debt can have a paralyzing effect. Certain debt can actually be useful. In the case of a home that becomes an appreciating asset, or a business loan that has a multiplying characteristic. Getting into debt can actually have benefits that outweigh the costs. Let’s examine different types of debt and find ways to reduce debt, and thereby reduce stress!

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Let’s take the time to examine your finances to get to the bottom of your financial situation.

We asked our senior financial planner for her best, yet harshest advice to getting out of debt, and she replied with two simple, yet powerful life changes

First, we are going to make a list of all income and expenditures. We need to track every penny that comes in, and every penny that goes out. Make a chart of what you earn each month, and a chart of what you spend each month. If your income is variable from month to month, then you will need to take what you earn in a year and divide by 12 months. Track all of your expenses for the month or year and calculate what you spend for each average month. This should give you a clearer picture of your situation. Once you have done this examination, you will be able to make better financial decisions.

Second, Let’s examine how much interest you are paying on each chunk of debt. Discovering this will help you to make clearer decisions about where to allocate your energy. Some common forms of debt include mortgage payments, auto loan payments, student debt, and credit card payments. Lets do some math to get started. We will use simple calculations to make this clearer. We will use typical interest rates to get started. Our goal is to pay off the highest interest debt first, without making any late payments for anything. Lets say you have a $200,000 mortgage and your interest rate is 5%. This means that each year, you are paying the bank $10000 in interest! This may seem like a high number, but it is not where you should be focusing. If you examine your credit card debt you will discover that this is where your should be focused on reducing principal to get out of debt. If you have $20,000 in credit card debt, and the interest rate is 25%, this means that you are paying a whopping $5000 per year in interest! This is what is bogging you down. If you have any high interest debt like this, you need to focus your energy to pay off this principal first!caculate expenses Okay. Now we know where to allocate the bulk of our payments, let’s decide how we are going to make this happen… You need to earn more money, or spend less money. This simple fact needs to become absolutely clear in your mind. We asked our senior financial planner for her best, yet harshest advice to getting out of debt, and she replied with two simple, yet powerful life changes that will make the transformative change in your life: 1. Spend ZERO time and money on television and social media. This sounds incredibly harsh, but lets examine how this will change your life. Cut the cable bill and streaming services bill from your life and you will find financial freedom. Consider how much time is spent doing these activities and how much advertising your brain has to process. These two factors are preventing you from securing your financial freedom. 2. Spend ZERO dollars on eating out. If you are like most Americans, you may wonder how this would even be possible. Once you have the clarity to see that you can save a ton of money by doing the most basic of tasks for yourself, you will start on the road to your goal of being debt free. Let examine what combining 1 & 2 will manifest. This simple pair of rules have a synergy that make each easier to do if you do them both simultaneously. If you send less time watching television and on social media, you will have all of the time necessary to cook/prepare every meal for yourself. If you spend the time and energy crafting meals for yourself and your family, you wont feel the urge to fill down time with empty entertainment. These measures of austerity may seem harsh, but once you have formulated your decision to get out of debt slavery, you will find the strength and courage to make this a reality. This pair of rules will also have residual benefits in addition to spending less money. You won’t have the mental stress of seeing all of the advertising and material world junk that exists in the modern media landscape, and this is good for your soul. You will also spend more time interacting with your friends and family, face to face, sharing meals in your home. Invite your friends over for a meal, and observe your bonds grow deeper! Keep track of money saved, on entertainment and eating out, and you will be able to stick to these rules. You will even notice a certain rush of endorphins and positive energy as you track your savings! Start today!