If you have debt hanging over your head, what’s stopping you from paying it off? It’s time to become debt free. As a financial planner I can tell you the most common answers are: I don’t want to withdraw from my savings, I don’t have enough savings to pay off the debt and I don’t make enough money to afford more than the minimum monthly payments. Do any of those excuses, I mean answers, sound like you?
The truth is we can all afford to become debt free, the question is how much are you willing to sacrifice to make it happen?
Trust me when I tell you that I know just how stressful debt can be. I was over $50k in debt by the time I was 30 thanks to student loans, credit cards and a new car. I definitely should have known better because like I said, I’m a financial planner. But that’s all in the past. Now I’m 35 and live debt free. Believe me when I tell you that I’m not going back to being broke.
Here are three things I did to become debt free:
Increased my income
When I hit rock bottom, like sitting in a bankruptcy office rock bottom, I decided that I was going to change my life around. Not by wiping away my debt and ruining several future years of my professional and financial life with bankruptcy, but by making changes.
First I got a second job (in addition to my job at the bank) in retail and then I got a third and forth job as a freelance writer. All my extra income went towards making additional debt payments.
Reduced the interest rates
I contacted every single credit card company (there were five) and begged them to lower the interest rates. I pulled out the “I’m a financial planner in a global economic crisis” card and the “isn’t it better to get paid a little bit of interest rather than have the entire outstanding balance written off in a bankruptcy” card.
I did whatever I could to get the interest reduced because 19% to 10% on a $10,000 balance is a lot of money saved on interest.
Paid off the lowest balance first
Some people like to pay off the credit card with the highest balance first or the card with the highest interest rate. I chose to pay off the credit cards with the lowest outstanding balances first. That way I could be done with them and reallocate those payments towards tackling the bigger balances.
Seeing a $0 balance also gave me a sense of accomplishment. I hated having several different payments and eventually just focused all my extra income on the last credit card standing.
This is only the beginning of my story – and oh boy does it get better. I’ll share an additional four tips on how to become debt free next time – so be sure to come back.