Do you dream of being financially secure? Most people do, but believe it’s out of their reach. The good news is – everyone already has everything they need to accomplish it.
Becoming debt free is not painless, but if you want it badly enough, you can follow these simple steps and become completely debt free.
Step One – Start by writing down what your life will look like once you are debt free. How will financial security look in your life? What will you be able to do? How will you feel? How will you be able to help others? This first step is important. This is your Vision Statement, and you will return to it when things get difficult, when you begin to feel frustrated and wonder why you are putting yourself through this.
Step Two – Be complete honesty with yourself. Stop hiding from bills. Make complete list of every bill you owe. It’s helpful to put it in spreadsheet form listing out whom you owe, their phone, fax, and mailing address, and how much you owe to them. Write down every debtor you can think of, then pull you credit report and add anyone you’d forgotten. This is your Debt List.
Step Three – Make list of all of your recurring monthly bills. Add a category for food. Now here is the painful part. The success or failure of your Debt Diet depends on your honesty in this part. Now remove everything that is not a necessity, that your existence does not depend on. Cable is not a necessity, eating out is not necessary. I break the basics down as follows: housing, utilities (heat/air, lights, water, telephone), transportation (car payment, insurance, weekly/monthly cost of gas if you have a vehicle; or weekly/monthly cost of public transportation), and food (basic groceries for a week/month). This is not the time to take up gourmet cooking or try new recipes. Allow yourself one meal out per month (it can be a lunch or dinner, your choice) This once a month meal out will become a special event and you will appreciate it all the more. That’s it. All other spending is restricted at this time. You do not NEED new clothes to keep you alive right now; you do not NEED to go to happy hour or girls’ night, etc. Because you have embarked on this Debt Diet, you have decided what you NEED is to become financially secure.
Step Four – Make a list of all sources of income. List where it comes from, how often, and how much. You may only have income from your one and only job. Some folks have a second job, side business, online venture, rental property or other form of income that should be included. Total all your monthly income, subtract the monthly total of recurring bills (the very basic stripped down version we created above in Step Three). Make note of the balance you have left over. This is your path to freedom. It may not look like much, or you may be happily surprised. Regardless, this is the cash that will change your life. Going forward we will refer to this as your Debt Cash.
Step Five – Prioritize your Debt List, from least amount owed to largest amount owed. Each month, write one check for the total amount of your Debt Cash, and send it to the first debtor on your list. Once you have that one paid in full, mark it through and move on to the next one. If the balance due on the debt you are currently paying is less than your total Debt Cash, write two checks, one for the total amount due on the first debt and a second one applying the balance of your Debt Cash to the next in line.
Step Six – Once you get organized and get started, you will be amazed how quickly your Debt List shrinks. The thrill of watching your progress combined with repeated visits to your Vision Statement should be enough to keep you strong in those moments you feel like cheating on your diet. One slip often leads to many more, so do yourself a favor and don’t cheat.
To move this process more quickly, find additional income. This could be in the form of a second job, turning a hobby into profit (selling crafts at a fair, offering your skills as freelance,) babysit, dog sit, have a yard sale, clean your closets and sell unwanted clothes in consignment store… get creative. Whatever you come up with, it is important you apply any additional income to your Debt Cash, not spending.
Once you have marked through the last debt on your list, you have entered the maintanence phase of the diet.
Step Seven – Review your monthly bills list again. Decide which things you have done without have been most missed and which you really haven’t notice gone. You may be surprised how little you missed some things you thought were priorities in your life. Add back on the extras that have proven very important to you, but only to the point of cutting your Debt Cash in half. Open a savings account if you do not already have one. You will now deposit your Debt Cash into the savings account each month, until you have the equivalent of four months total bills saved. Once that is accomplished, you may add more luxuries back to your budget, enough to cut your Debt Cash by half again. This is now your final monthly budget. Your monthly Debt Cash should now be invested. Seek professional guidance to determine the best investment opportunities for you. Do not think you do not have enough to invest. Even if you have to split the cost of one share of stock over a couple months, for the right investment it can be worth it.
Step Eight – Go forward and enjoy life without debt.
You may wonder how I am qualified to speak on this subject. Let me list my credentials: I graduated top of my class from the University of Life with a major in Creating Debt, a minor in Making Mistakes; I went on to get my masters degree in Wrong Choices from the College of Human Nature. I continue to further my education at Second Chances Community College where I have received certificates in Suck It Up, Humility, Basic Math, and Hard Work. I am currently working towards a second Masters in Finally Made It.
In other words… been there – done that- lived through it- found a way to come out on top! The steps listed above worked for me. I am confident with true commitment, it can work for you too!