Reading the news on Friday I found myself shaking my head at the fact that because
With all the money trouble the Western World is in right now it only makes sense that in order to protect yourself you – the private citizen – have to do the smart thing: get out of debt! Now!
Ahh, but it’s so much easier said than done isn’t it? Getting out of debt requires hard work, sacrifice, and living an – dare I say it? – austere lifestyle. For those of you already out of debt and living this way: Congratulations! You have a wonderful skill that will serve you well for the rest of your life. For those who don’t… well, now’s the time to get started on a new lifestyle. I did the Dave Ramsey get out of debt plan and it works, but it ain’t easy.
The Twelve Steps
Here’s a 12 Step Program for debt junkies:
1. Make a spending plan, sometimes known as a budget. Write down everything you owe, how much you spend in utilities and food, fuel, etc, and then figure out how much you make in the course of a month.
When I went through my debt reduction plan this was easily the most important thing I did. It’s a real eye opener if you haven’t done one before, I can assure you.
2. Stop spending more than you make. This might sound overly simplistic, but it can be very difficult – especially if you feel you “deserve” expensive toys, expensive vacations and electronic gadgets and pricey voice and data plans.
3. Live beneath your means. This is a tough one for a lot of people with a steady line of credit. If you make $2000 a month pay off all your bills, put some in savings and if you’re debt free feel free to take yourself out to dinner.
If you’re not debt free put every available penny on your debt until it’s gone.
4. Put $1,000 aside for emergencies so you don’t have to use a credit card or borrow in case something happens.
5. Stay focused on paying your debt down. Don’t get sidetracked buying toys or items you don’t need.
6. If you have expensive vehicle payments sell them! Get yourself a beater and drive it until the wheels fall off. My last truck was a 1996 Dodge Ram with 264,000 miles on it. I paid a thousand bucks cash for it and currently have it up for sale to help pay for the new (used) truck I just bought (paid for with cash.)
7. Use the envelope method to budget your money. Take some envelopes and label them like this: groceries, gifts, gas, propane, electric, or whatever it is you can pay cash for. Populate it with money when you get paid and when you go to buy groceries, for example, take the money out of that envelope. When the money is gone, you don’t buy any more groceries. Spend it wisely!
8. Get a second job, if possible. Deliver papers, work at McDonald’s, whatever it takes to do to make extra income. Apply all this to the debt.
9. Get your spouse on board with you. If you both aren’t on the same page with this it will be much harder to pay off your debt. Unlike prepping, where you can still do a few things without your significant other’s blessing, working off debt has to be a team effort.
10. Want it. In order for this to work you’ve got to want it. The more you want it the harder you’ll work towards it and the faster you’ll pay it off.
11. Cut up your credit cards. It’s like a heroin addict who keeps a a little on hand “just in case.” If it’s there you’ll find a reason to use it. The $1000 you saved in step 4 is so you won’t have to use a credit card if things get dicey.
12. Start now! Don’t wait for things to get better, or until your income tax check comes in, or you get that big promotion at work, or the moon turns to cheese. Start planning now. Go back to step 1 and start a spending plan. This bit of planning can take anywhere from a night to a week or two depending on your financial state, but get started.
I’ve left a lot of detail about executing these individual steps out, but in the coming weeks I plan to take each of the topics and devote a post to it, so that you can how I went about becoming debt free.
If the TSHTF you can go about your business knowing you’ve got no debt and a nice savings account to rely on if necessary. Paying off all my credit cards and other debt was one of the single most satisfying moments of my life.
Are you debt free?