Last week I shared some important mindsets you need to have if you truly want to get out of debt. Those mindsets are all well & good, but like faith, it won’t do any good to have good mindsets if there is no action to back it up. Having the right thinking won’t do any good without taking the right actions, too. So, here are some helpful tips, some steps David & I took that helped us get out of debt. Hopefully, they will help you, too!
- Having the right attitudes & mindset is key: This is the first & most important step. This is what will help you get on track & stay on track. It’s like archery. You aren’t likely to hit the target if you don’t establish proper aim, first. Make sure you know why you want to do this, set your mind to it, make a plan, & stick to it.
- Create a budget: You HAVE to have this. This is your road map or, to be more modern because no one uses road maps anymore, your GPS to spending less than you make each month, & spending less than you make is what will help you get out of debt. As our pre-marital counselor put it, a budget is how you make your money work for you, not the other way around. There are a lot of ways & resources you can use to help you create a budget such as Every Dollar or Mint. Don’t be overwhelmed, you just have to figure out what works for your family. I use an excel spreadsheet with the rows as my budget items & 2 columns per month- the 1st as the budgeted amount for the item & the 2nd is the actual amount spent for that item (in case a bill was more or less than expected for some reason). I turn the cell green once the item has actually cleared the account & posted, & I put a comment in a cell if I used a paper check to pay or want to remember something specific about that payment. Check out my example here: Ex Budget **And here’s a handy tip- if you’re just starting out & are finding it hard to establish budget amounts, take a look at past bills & establish an average amount. I do this for our power bill- throughout the year, it averages about $120/month. In the hot & cold seasons it might be more, in the in-betweens it is usually less.
- Cut out unnecessary spending *for now*: If you are on a tight budget or you’re trying to get out of debt, you need to cut this out. Yes, it’s going to stink for a bit, but if you cut out the unnecessary spending & instead apply that extra money towards your debt, you’ll pay the debt off faster & pay less in interest. This doesn’t mean you have to be bored or unfashionable all the time. There are plenty of FREE fun things you can do & still have a good time- watch TV, go to the park, play a board game, read a book, whatever. And you don’t HAVE to have the newest fashion, make-up, & accessory trends. Make do with what you have or if you ACTUALLY do need something because you’ve worn your clothes or shoes out, then go to Goodwill or a thrift store. It doesn’t have to be BRAND new or BRAND name…it just needs to work. Add it up, between Netflix, cable, eating out, date night spending, the monthly box or bag subscription you joined…it turns out to be A LOT of extra money…all of which could be going toward your debt instead. For some of you, that could add up to a whole extra payment towards your car or student loan. If you cut these things out & start putting that extra money towards the debt, you’ll see it paid off faster than you thought possible.
- Give to tithe & savings BEFORE anything else: “Pay” the Lord & “pay” yourself first. Whatever is left is what you budget towards bills. This will develop a trusting & frugal heart & attitude in yourself. When you give to God first, this teaches you to trust Him more than your money. When you put money in savings next, you are already creating an emergency fund that could help keep you out of more debt in the future should an emergency like a tire blowout or home repair occur.
- Use cash for as many purchases as possible: This is an idea we borrowed from Dave Ramsey. We don’t really use his envelope system or keep track of individual purchases, but we pay cash for most of our needs. We use cash for our groceries, buying gas, paying vet bills, getting haircuts, etc. With a debit or credit card, sometimes it’s too easy to swipe without thinking which leads to overspending. Using cash will help you be more intentional in your spending & you’ll begin to train your brain to say “This is how much I have in hand…I either need to figure out how to stretch it, toss out the unnecessary, or wait to buy ___ until later.” Dang, if you have to, put that debit or credit card in the freezer. I never thought that would actually work, but I can tell you for a fact since my card went in the freezer, I’ve hardly even been tempted to use it…the effort & time it would take me to unfreeze it is enough to talk me out of using it.
- Give each “spender” in your family a personal allowance: This is an idea a friend of mine told me about. Each spender…aka, each adult with access to the main account would have their own personal spending allowance each month- say $10, $20, or whatever works for your budget. You can each use your allowance for whatever you want, no questions asked, no permissions needed. You can save it, spend it, whatever. This gives you each some freedom & decreases the temptation to spend money that is needed for something else, or spending without communication.
- Make extra payments towards your debt and always make them on time: If you follow some of the tips I’ve already described, I bet you will have already saved some green. Now that you’ve saved that, don’t go spending it on things you don’t need. Apply it as extra payments towards your debt. Not only will you pay it off faster, you’ll also pay less over time. It is likely you have interest growing daily based on the principal balance of the loan. If you make extra payments, you are lowering the principal balance faster & therefore lowering the interest you’ll pay over time. Also, make sure you always make your payments on time, whether this is for debt or monthly bills. You will avoid paying extra in late payment fees or interest if you make them on time.
- Find a way to earn extra income: If cutting back isn’t enough, you probably need to find a way to earn some extra cash. So…get a part-time job, start a lawn-care business on the side, start your own small direct-sales business, have yard sales, etc. You will be tired, but it will be worth it to pay off the debt faster & then you could turn around & put that money towards investing in your future.
- Snowball our debt: Again, this is an idea we borrowed from Dave Ramsey, but it really works. Take all your debt & order it from smallest to largest. You will continue making all of your payments but when you make extra payments put them toward the smallest first until it is paid off. Then, take everything you were paying towards that smallest debt (including the extra payments) & start putting it towards the next largest debt in addition to its regular payments. So on & so forth, until everything is paid off. You’ll find you can get your debts paid off MUCH faster this way than if you just continued making the minimum payments.
- Prepare a shopping list & eat BEFORE you go shopping: This is pretty straightforward. Only put the things you NEED on your grocery list, eat BEFORE you shop so you’re not tempted to buy more than you need, and only purchase what is on your list. I think you will be amazed to see how much money you could save compared to what you were spending before. (And don’t forget to only use cash at the store!)
- Become a meal-prepper: Make your meals at home & make them from scratch. When you buy fresh produce & cook at home, it’s a lot less expensive than eating out or buying pre-made food. You’ll find, not only does it save you green, it also will last longer & you’ll find you’re eating healthier, too.
- Shop at stores like Aldis, Big Lots, & Goodwill: Find your local discount stores. Aldis is notorious for the amount of money they can save you & the food is healthy, too. Also, for home goods & clothes, you can get what you need at places like Big Lots & Goodwill. Some people would complain about buying used clothes at Goodwill or other thrift stores, but if you shop in the right locations, you can find brand name clothes with the tags still on them for 1/10th of the price it would cost to buy them in store. Who cares what anyone else thinks about you shopping there. You’re getting what you need, saving money, & you’ll be all the better off for it.
- Save all your change from cash transactions: Again, as we said earlier, you should be paying for most, if not all of your needs & bills in cash. When you do, commit to saving ALL of your coin change from the transaction, no matter how much it is. Take the change & put it in a jar or bottle. Put it somewhere you won’t see it regularly, & overtime, you could end up saving hundreds of dollars that you can use to help in a pinch or for a vacation fund. You’ll be surprised at how much you can save that way & also, it’s another way to live on less than what you make & what you budget. When you’re ready to turn the change into bills, try to find a location or bank with a coin machine that won’t charge you a fee…or if you have to, roll those suckers on your own to turn them in.
- Once you’re out of debt, commit to NEVER going back into debt: This whole time you still should’ve been putting money away in savings. When stressful, difficult situations arise, it’ll be tempting to use a credit card or turn to a loan. But just say no. Once you pay down all your debt, start aggressively saving money or investing, so that when that emergency arises, you won’t have to turn to debt, but can turn to your savings fund instead. But whatever you do, never go back into debt again. You’ve freed yourself from the slavery of debt…why would you want to put yourself back in?
What are some things you do to save money or ideas you have to help you get out of debt?
Be blessed, friends.