You are not alone.
Debt Reduction Step #1: Recognize the danger of debt and make an ironclad commitment to be debt free.
The motivation to change behavior starts with a clear understanding of the danger of continuing to live in the
debt trap.
Recognizing the depth of the danger is the first step.
The second step is arriving at a point where the person in debt is willing to make a solid commitment to an end goal of being debt free ... and wanting it enough to pay the price to achieve it. Nothing of value that costs us something is ever accomplished without first making a commitment to achieving the goal. No matter what the cost.
- Debt Reduction Step #2: Take on no more new debt.
Becoming debt free will only happen by taking debt in one direction ... down!
Adding new debt while trying to reduce old debt will never result in success. All new debt must be avoided!
- Debt Reduction Step #3: Destroy credit cards that are controlling your life.
Credit cards, themselves, are not the problem.
The problem is the person who is misusing the credit cards and allowing them to have control.
If the presence of credit cards means that they are controlling or temping you to use them ... then they should be destroyed ... at least until achieving the goal of being totally debt free.
If you genuinely feel you need one credit card for emergencies or convenience, then consider these two options….
If you truly can control your use of a single credit card, then follow these guidelines…
- Have only one credit card
- Use it as little as possible
- Always pay it off in full each month.
This combination of factors will help you have a much better grasp of credit.
Now, if you cannot successfully use a single credit card in this manner, then another suggestion is to keep just one credit card to have in case of emergencies.
So you won’t be tempted to use it for impulse buying, keep this card frozen in a metal can of water.
That way if you want to use it to buy something, you have to let if melt to get to the card. Since it is in a metal can, you can’t put it in the microwave to thaw it quickly.
Then, after the iced is melted and the card is free, ask yourself if you still want the item so badly.
Debt Reduction Step #4: Establish and live on a
Spending Plan (budget).
It is nearly impossible to avoid the grips of the
debt trap
apart from a budget that will provide the basis for freeing up money on a consistent basis to pay down the debt.
Debt Reduction Step #5: Account for and list all assets and debts.
Before eliminating debt, you must first be clear as to how much and where you owe money. This will form the basis of a plan to systematically pay off the debt in the most effective way.
Also, knowledge of all owned assets may lead you to the conclusion that selling some unneeded assets can be a quick source of cash. Use this cash to more quickly pay off debt.
Debt Reduction Step #6: Pay cash for things.
This is powerful in terms of reducing spending (which always happens when switching from plastic to cash). Also, when using strictly cash it is impossible to go into further debt.
- Debt Free Step #7: Develop a detailed written debt reduction plan.
Putting your debt reduction plans on paper and following it religiously will accelerate your freedom from the debt trap.
The more structure and discipline to the plan the more effective the effort.
Debt Free Step #8: If necessary, work with creditors to reschedule payments. This will help you to avoid missing due dates and to align the maximum amount for debt reduction with
your budget.
After getting a creditor to agree to reschedule, it is critical to never miss a payment!
Debt Free Step #9: Apply all "windfall" money to debt reduction.
Debt will reduce more quickly if a premeditated commitment is made to put 100% of all "windfall" money toward debt reduction.
Windfall money is defined as any money you receive that is unexpected. This would include bonuses, refunds, returned deposits, etc.
Debt Free Step #10: Before you purchase anything, evaluate the real "need" for it.
So often, we go into debt by purchasing things that do not represent a real need.
When we buy "wants" instead of "needs" the result is often excessive debt. That's because our wants tend to be unlimited.
The problem for many people in our society, culture and, particularly, advertising is constantly trying to get us to view our wants as if they were needs.
Once we are convinced that a want is really a need, we tend to have very little resistance to purchasing it, even though the result is more debt.
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Debt Free Step #11: Pay attention to all the little expenses.
These add up. Say you go to a fancy coffee shop daily and buy a coffee and scone for $3.25 a day. (This is cheap for most of those places)
The difference between overspending $3.25 a day vs. saving this $3.25 a day over a 10-year period is $41,000.00!
