How To Get Out of Debt in Order To Build WealthApril 30, 2018 April 9, 2021 /
Having debt and planning to be Financially Independent feels like starting a baseball game already down five runs.
It’s a tough position to be in for sure. However, the good news is you have the ability to come back from your deficit.
And before you know it, you’ll be toasting to your well-earned victory.
There are so many questions about debt:
- Is there good and bad debt?
- Should I invest or pay off debt or both?
- If I have debts should I still tithe?
- Should I pay off my mortgage?
- Should I pay off my student loans?
- Does a bankruptcy clear all my debts?
- Should I take out a consolidation loan?
- Do I close an account once a balance is completely paid off?
- Should I build an emergency fund before paying off debts?
- What happens to the money I owe when I die?
These are all good questions and you may want to copy and paste some of these into Google. But first…
Eliminate High Interest Debt!
If you are paying high interest on debts like credit card balances, payday loans, car loans, or signature loans, admit that while you may have justified them in the past, they have no place in your financial future. It is up to you to free yourself from this burden.
You’ve decided to pursue Financial Independence so you know that financial liabilities impact your ability to invest assertively. You know that having debt can have unwanted side effects like increased stress and anxiety, which can then effect relationships and quality of life.
Managing (eliminating) your debt can bring peace of mind.
Okay, you’ve got bad debt. You know it and you are ready to get rid of it.
Take action today.
The 5 Steps To Get Out of Debt
- Make a list of all current balances and associated interest rates.
- Rank your debts from highest interest rate to lowest interest rate.
- Automate the minimum monthly payments due on each balance.
- Make additional principal payments on debts with the highest interest.
- Each time an account is paid in full, redirect those payments to the balance with the next highest interest rate.
It’s motivating to know that every dime you make after your albatross of liabilities are gone now belongs to you and your future.
During this process it is important to keep a few things in mind. If you find trouble executing the above steps, take a closer look at how to budget money and consider side hustles to make extra money.
- The Emotional Burden Of Debt by Jane Hwangbo of medium.com
- The Dark Side Of Interest by Joel of fi180.com
- Kick Debt’s Butt! How To Get Out Of Debt On Your Own by David Weliver of moneyunder30.com
- News Flash: Your Debt Is An Emergency!! by Pete of mrmoneymustache.com
- A Step-by-Step Guide To Getting Out Of Debt by Johnny Appleseed of lifehacker.com
- How To Pay Off $87,000 of Student Loan Debt by Marissa of thebudgetingwife.com
- Now for the fun stuff that actually makes a difference in your world. Put a plan in place to pay what you owe. Determine what balances are going to get paid off and in what order. Calculate the date you plan to no longer be in the red (with the possible exceptions of mortgage and student loan payments). Publish these dates somewhere you (and others) will see them often. Dry erase marker on a bathroom mirror works. So does putting it into your electronic calendar and posting it on a home bulletin board or refrigerator. This endeavor will be a challenge, a challenge worth undertaking and necessary to reach Financial Independence. When times get tough, remember your why of Financial Independence.
- Explore two of the most popular debt calculators Debt Paydown Calculator at bankrate.com and the Debt Repayment Calculator at creditkarma.com
- The Best Debt Payoff Method by Mark of laurengreutman.com
“What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?”– Adam Smith