While I love doing my weekly podcast I started realizing that I also wanted to be able to share quick tips or lists for you to reference without having to listen to entire episodes. Don't worry, the podcast is not going anywhere! I just wanted to create some additional content to help spark that fire to financial freedom 'cuz it feels really, really good to not have to worry about money and I know someday you can get to this point too!
So, if you clicked this you likely have some debt. Good debt (like a mortgage) or bad debt (like credit cards)? What's the interest rate? Some people say if it's less than 6% or so you should continue to pay the minimum and invest in a mutual fund. I typically say: PAY IT OFF! (with the exception of mortgages under 5% in which I could go either way). Okay so continuing, you have debt and you want it gone ASAP well you've come to the right place. Here's my 5 top tips:
1.) Do not add to it! - This may sound super obvious but I've worked with people who piled on the credit card debt or student loan debt and while they're paying it off they all of a sudden buy new furniture.....on credit. If you don't have the cash for something you no longer get the luxury of buying it. Anything you buy that is not a basic necessity (food, water, and shelter) needs to be paid for in cash from now on.
2.) Prioritize it! - You may think "Duh, obviously why I clicked on this post in the first place it IS a priority" HOWEVER this needs to go through your head with every single purchase you make from now until this debt is paid off. You want those $50 shoes? How much longer will you have the debt because of it? You want to go out to eat once a week for $15 a pop? That's $780 less you have this year going to debt reduction. Come on, this debt is a priority so treat it like one.
3.) Learn new ways to have fun! - Money <> Happiness (aka. money does not equal happiness for those that don't appreciate math logic symbols). If you're in a pile of debt in the first place you've obviously been living outside of your means and must believe that money is the key to buying things to make you happy. Or you have really bad luck but most of the time it's the first one. I want you to stop spending money on all extras right now. No more coffee (had to mention the cliche), no more going out to eat, no more bar money etc. It's going to be tough at first but once you realize you can have fun without all these things you'll realize what true happiness is all about.
4.) Reduce Basic Necessities! - Food, Water, Shelter - that's all you get to spend money on while you're in extreme debt payoff mode. Even those need to be reduced as much as possible. My bare-bones food budget is $150 a month per person - some people can go even lower but I like to eat healthy besides eating only Ramen noodles will only lead to way more $$$$ later so this is the only area I'll cut you some slack. No restaurants either, time to become BFFs with your kitchen. Water should be free: no fancy pants mineral water that rejuvenates your soul with each sip (marketing anyone). Oh and shelter - if your debt is really bad you may need to consider a roommate or 2; if you're older you may need to downsize. Living in a McMansion, driving an SUV, sipping on lattes everyday only makes you feel rich but we know the truth so NEWS FLASH it's time to de-super size your life.
5.) Be Patient! - If you read everything above while vigorously nodding your head in agreement and still feel like your debt is never going to be paid off, GIVE IT TIME! I know that's not what you want to hear but it took time to get in this mess and it's going to take some time to get out of it. Stay the course and it'll be paid off before you know it and then you'll be an investing/saving machine, RIGHT?