When you’re are looking to accomplish something, it is a lot easier to make progress when you have some steps to take. Otherwise, it can be challenging to even figure out where to start. You also don’t want to have too many steps, you want to keep it simple so that you don’t get frustrated in the process. That being said, here are five steps that you can take to expedite getting out of debt and begin your journey to becoming debt-free.
1. Track your finances monthly
You have to be intentional about your finances. You can’t just spend money that is unaccounted for and then wonder at the end of the month where all of your money went. The best thing to do is to create a budget that tracks your income on the top and your expenses on the bottom. Then subtract your total expenses from your total income and this will show you if you have either a surplus or a deficit. A surplus means that you have money left over to use to pay down your debt. A deficit means that you are spending more than is coming in and that you need to make some drastic budget cuts if you want to get ahead. I have created a Starter Budget form to help you with this process. In addition, below is a video that will walk you through filling out the form.
How to Create a Budget in 10 Minutes or Less
2. Decrease your expenses
Go through every line of your Starter Budget and ask yourself “how can I make this number smaller?” Keep doing this until you feel like there is nothing left to cut. Groceries & Entertainment are areas that can be budget busters so make sure to keep a close eye on them. Put a lot of time and thought into this step as it is key to getting out of debt quickly.
3. Create a debt elimination plan
You also need to know how many debts that you have as well as the amount that you owe on each debt. Take the time to write all of your debts on a sheet of paper, ordering them smallest to largest using the Debt Snowball method. Don’t think about the interest rate at this point, just the total amount owed for each debt. For instance, if your lowest debt balance is a Visa for $200, then put that first. If your second lowest is $400 on a Macy’s card, then put that next and so on. If you would rather use an excel spreadsheet rather than a piece of paper you can use the Debt Snowball form.
See the example below for more details on how to fill it out.
4. Any extra cash you receive goes to pay down debt
This is one of the steps that can be very easily overlooked. When you get a bonus or a tax refund, it can be tempting to want to go out and celebrate. However, if you really want to get out of debt and make progress toward your financial goals, you need to create the discipline of putting any extra cash that you get towards paying down your debt. This is key to getting out of debt quickly since it is these windfalls of cash that you didn’t normally expect that give you the progress you need to build momentum.
5. Sell what you don’t need
First, we need to address the word “need”. You don’t need a $50,000 BMW but perhaps you do need a vehicle to get you to and from work. If you want to get out of debt bad enough, you need to make sacrifices now so that you will be better off in the long run. Maybe you don’t have a BMW and a car is not something that you have to sell. No worries. Go through every cabinet, closet, drawer, etc. and find items that you can sell on Craigslist, Ebay, or Amazon to earn some extra cash.
Do you want to get out of debt? If so, implement these five steps and you will be surprised how quickly the debt will begin to disappear.
Refinance Your Student Loans or Credit Card Debt
With the average credit card interest rate around 15%, this could save you a ton of money over the long haul. SoFi will refinance your credit card debt to as low as 5.99% so that you can pay your debt off even faster. Use this link to get $100 cash back if you get approved. They also refinance student loans to as low as 2.355% APR.