One of the most important factors in the quest for financial freedom
is to completely eliminate debt.
Why do we get into debt? Our society perpetuates the myth that credit and borrowing are necessary, even good. This is a lie. No matter what you’ve been taught, debt is not a tool. It brings enough risk to negate any advantage that may be gained through its leverage. Excessive use of credit is the most common form of Financial Bondage.
Why eliminate debt? Because building a financially secure future is easy if you don’t have any payments slowing you down. This is only possible through debt elimination, or better yet, in never accumulating any debt in the first place.
Debt is your enemy, not your friend. Just think, if you could take the money you’re currently putting toward debt repayment and invest it instead, you’d be traveling the high-road in no time! Imagine --- no car payments, loan payments, credit card payments! Imagine that money accumulating and growing your nest egg instead! Or for a down-payment on that house you’ve always wanted. Or paying off your mortgage! Or starting your dream business! The possibilities are limitless once those albatross payments are gone.
Be forewarned: debt elimination takes determination and sacrifice. That’s the only way abolishing your debt will happen. A half-hearted attempt will not work. Kill the debt! It may mean selling that car you can’t afford and being content with one you can afford, or even riding the bus for a while.
Whatever it takes. Kill the debt. Then you will be able to breathe (financially).
The following debt elimination process is a simple concept, often referred to as The Debt Snowball:
Step 1: cut up your credit cards. No more borrowing!
Step 2: set up your Debt Snowball: List all your debts, starting with the smallest payoff and ending with the largest. Include all credit cards, personal loans, car payments, student loans, etc. Don’t worry about the interest rates, just the size of the payoff balances. List your minimum payment for each, and each balance.
Step 3: make sure you are current on all your payments before you start.
Step 4: focus on paying off the smallest debt while making minimum payments on the others to stay current.
Step 5: free up money from other areas to include in your debt repayment plan. Sell things, eliminate unnecessary expenditures and put those funds into debt repayment, take on more hours at work or a second job. This is called “Found Money”. This will be key if your budget is maxed out: It will allow you to get the ball rolling. Remember: this is only temporary. Once the debt is abolished, life will return to normal, but without the financial deadweight (or debtweight!).
Step 6: Once your first debt is paid in full, add that payment, plus “found money”, to the second debt payment until that one is paid in full. Keep the remaining payments current.
Step 7: Continue through your debt list, adding previous payments and “found money” to each successive debt. The payments are growing much larger with each payoff. Keep going!
You will come to bumps and detours. Deal with them immediately, then resume the Debt Elimination snowball.
Also remember to celebrate your successes along the way.
Just keep that ball rolling!
Focusing on the small debts up front will provide quick successes
and start the momentum. This will get you fired up enough to stay motivated, despite what those around you may be trying to tell you. Don’t listen to the nay-sayers. Your momentum will give you incentive, and your progress will give you a charge. The debts will gradually get paid off faster and faster as the payments build and the snowball grows. Whoo-hoo!
Here are The Keys To A Successful Debt Snowball:
• stick with a budget to plan your expenses
• get current on all your payments before you start
• proceed with smallest to largest payoff plan
• make it a priority over all your “wants”. Attack it until it’s dead and gone. No matter how long it takes, paying off all that debt is worth it! The sacrifices you’re making to “cut the noose” are only temporary.
• determine to never go there again!
Then you can breathe!
For hands-on help with credit card debt : CardDebtGuide.com is a money management resource to help people with credit card debt learn about money saving advice, debt counseling, credit card debt relief, loan consolidation, debt settlement, bankruptcy, and credit repair.
If you want to learn even more about Debt Elimination, I recommend Dave Ramsey’s book The Total Money Makeover available in bookstores and online.