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Feel like debt is ruling your life?
Let me tell you a story about someone who got in way over his head with debt.
He graduated college with a Teaching Degree and started his first big boy job as a paraprofessional. He thought he had it made. After all, the American dream is to go to college, get a job, and live happily ever after. The problem was he had way too much debt, and not nearly enough income to match it. Anyone else in this boat?
The numbers lined up something like this:
- $50,000 of student loan debt
- $1,500 credit card debt
- $300 car payment
- Grand total: $900 a month of obligations to debt.
At the time, his luxurious professional salary raked in about $1,600 a month. That was barely enough to cover his debt, leaving only about $700 to pay for rent, car insurance, his cell phone, cable and internet, and entertainment expenses.
At best he was breaking even, but more often than not, he saw his checking account dwindle each month because he wasn’t making enough money to uphold his lifestyle.
True confession: that someone was ME.
My wife had a similar story, so when we got married, we had nearly $90,000 of debt and lived on two teacher salaries.
Today, there are so many young people graduating college with mountains of student loan debt, and possibly other debt, working at a job that doesn’t give them enough income to support their debt, family, and lifestyle. Maybe you’re one of them.
If you feel lost and don’t know where to start, it’s okay. You can start here, right now!
3 Steps for Getting Out of Debt
1. Stop Spending Money
Getting your finances on track and getting out of debt won’t be comfortable. It might really suck. It’s blunt, but it’s the truth. If you want to get out of debt, you need to make changes to what got you into debt.
The best place to start is to stop spending money! It sounds obvious, but if you’re in a habit of buying new stuff all the time, you might not even be aware of how much you’re actually spending. If it isn’t an absolute necessity or a bill that needs to be paid, tell yourself ‘No.’ This will take discipline, sacrifice, and a lot of self control.
But you won’t ever get out of debt if you keep spending money. You will probably just go into more debt. Many people believe an increase in income will help them get out of debt, but the truth is, if you don’t change your spending habits, it doesn’t matter how much money you make. You will probably just spend more.
The Zero Day Challenge
One of my favorite blogs is Zero Day Finance, run by a New Yorker named David. He advocates a system called the Zero Day Challenge to help change spending habits and use your money toward your true financial goals. I’ll give you a brief summary, but I you should definitely head over to his site for the full scoop.
Here’s how it works. The goal for each day is to spend Zero dollars. Obviously that’s impossible every day because you do need to pay bills, but if it’s not a bill or a necessity, he advocates no spending.
It works well to use a calendar to help you track, so each day that you meet your goal of spending Zero dollars, write a big ‘0’ on the calendar. If you do spend money, to pay a bill or if you buy a soda at the gas station, write that on the calendar instead, along with how much it costs. It provides a great visual of how much you’re spending and what you’re spending it on.
At the end of the month, count up how many Zero Dollar days you had. Then next month, make a goal to beat it! If you’re married or are doing finances with a partner, you both need to be upfront, honest, and accountable to your spending and check in at the end of every day. Don’t be ashamed if you spent money, be honest and write it on the calendar. Your spending habits won’t change if you’re hiding purchases.
2. Start a Budget
The best way to change your finances is to figure out where your money is going. If debt is overrunning your life, creating a budget will help you take back control! Your budget doesn’t need to be perfect or 100% figured out when you start, the important thing is that you START!
Sit down with your partner, or if your partner isn’t willing, sit down and start on your own. You can always share the budget with them later.
The goal of your budget is to figure out how much you are actually spending every month. Once you know how much you’re spending, you can compare it to how much you can afford to spend. It’s a great tool to help visualize if you’re overspending and helps manage your debt.
Again, this will require you to get out of your comfort zone. Budgeting doesn’t come natural. It takes work and determination to sit down, look at your bank account, track your spending, and write it into a spreadsheet. But you’re ready for a change aren’t you?
Step up to the plate and put in the work to change your habits and get out of debt! I find it works best to have a “budget meeting” at the start of every month to plan for upcoming expenses.
3. Figure Out Your WHY
Every great success story starts with a crystal clear WHY. There is always an end goal in mind. Luke Skywalker wanted to free the galaxy of Darth Vader’s oppression. Frodo Baggins wanted to destroy the Ring of Power and return to the Shire. Kevin McCallister wanted to defend his home from burglars until his parents got home. When the going got tough, because trust me it always does, they kept going because they knew WHY they started in the first place.
For me, I wanted to start a family and buy a house. I knew I couldn’t do that with mountains of debt looming over me. If we were paying $900 a month to student loans, how would we pay for daycare? What would we do if we bought a house and the furnace or hot water heater broke?
Our WHY was crystal clear and every time we clocked into work at our second (sometimes third) job, we knew WHY we were doing it. Every time we said ‘no’ to go out to eat, or travel, or buy ourselves gifts, we knew WHY. Our future was more important than the current wants of the moment.
I challenge you to find your WHY. When you do, nothing will hold you back from turning it around. Your debt is only temporary, if you’re willing to get out of your comfort zone.
A Couple of Freebies to Get Started Today
I want to share a couple tools that changed our finances and keep us on track for our goals! The first is a budget spreadsheet that we use in Google Sheets! I love it! It automatically calculates our income and expenses so all we need to do is enter the dollar amounts!
It’s also fully customizable. You can change the names of any categories, add income streams, add expenses, take away expenses, and really anything else you want. I have made dozens of changes over the years and adjusted it to our needs. I hope you do the same.
If you have a lot of debt, it can be difficult to manage and track. That’s the beauty of the Debt Log. It comes with complete instructions to set-up and customize according to your situation.
I created this myself with help to figure out the formulas. Once you fill in your data, you will have an estimated time frame for paying off all of your debt. Our student loans were supposed to take us 25 years. Sticking to a budget and using this debt log helped us do it in less than 4. Again, it gave us a clear picture and a goal to focus on.
How to Get These Freebies
At the bottom of the page is a link, or you can click ‘Subscribe’ right here. Not only will you get these great tools, but you will also get new blog posts delivered directly to your email. You will only get notifications when I post a new article. Become part of a great community of people working hard to get out of debt!
Wrapping It Up
Your debt won’t go away by itself. You have the power to change your current situation if you have the courage to say yes to your WHY.
Let Me Know in the Comments
What is your WHY? What are you willing to give up to get out of debt?