Hey Hey, Prosperity Partners!
Ready to kick your debt to the curb in 2024? You're in the right place. Dealing with debt can be tough, but you're making a smart move towards a more “soft” financial life.
Let’s dive in!
Step 1: Understand Your Total Debt
To get a clear picture of where you stand financially, start by understanding who you owe and what you owe. This is the first big step toward debt reduction or getting your debt under control.
You’ll want to make a list of everything: credit cards, car loans, student loans, collections, charge-offs, money borrowed from friends or family, you name it.
Step 2: Setting Realistic Debt Reduction Goals
Now, it's time to set some real, tangible goals that align with what you truly desire. Ask yourself: ‘What debt do I want to knock out first?' It may be the debt with the highest interest rate or the one with the smallest balance so you can quickly get it out of the way.
Establish a specific amount you want to pay off and set a deadline. Remember, a goal without a deadline is just a dream, and your debt is very much a reality!
Step 3: Creating a Tailored Budget for Debt Reduction
It’s budgeting time! You’ll need to plan where your money should go each month. Make a list of your income from all sources. Then make a list of all of your expenses.
Then, analyze and adjust—can you cut back on anything? Eating out? Television subscriptions? Meal prep? Every dollar you save is a dollar that can go towards paying down your debt. You’ll need to adjust your budget to squeeze as much out of it as possible to focus on paying off your debt.
Step 4: Effective Strategies for Paying Off Debt
You have your debt list, your budget, and know how much you can put towards your debt each month. Now it’s time to decide how you will tackle your debt.
There are 2 popular methods, the debt snowball, and the debt avalanche.
- Debt snowball – you pay off your debt starting with the smallest balance to the highest balance.
- Debt avalanche – you pay off your debt starting with the highest interest rate to the lowest interest rate.
Both are great ways to tackle your debts; there is no right or wrong choice, just the one that will work for you right now (you can always change it). The most important thing is for you to get started.
With both methods, you’ll also implement the ‘pay more than the minimum' strategy. Here, you’ll pay more than the minimum payment and make additional payments whenever possible. This shaves off time and interest from your debt, which allows you to pay them off sooner.
Step 5: Boosting Income and Cutting Expenses
To get out of debt even faster, find more money. Think about starting a side gig, part-time job, or selling things you don't need.
Review your expenses. What can be eliminated or temporarily paused until your debt is paid off? This could be anything from subscriptions, switching to a cheaper phone plan, changing insurance companies, and more. Small changes can make a big difference.
Step 6: Staying Motivated and Tracking Progress
To keep yourself motivated and see how you're doing, try these:
1. Keep Your Goal in Mind: Always remember why you're doing this – to be debt-free. Picture how great it will feel.
2. Use Tech or a Simple Chart: You can use phone apps or make a basic chart on paper to see how your debt is going down. It can be exciting to watch those numbers shrink.
3. Celebrate Small Wins: Don't forget to cheer for yourself when you pay off a credit card or make progress. It's a big deal! Give yourself a pat on the back for your hard work.
Final Thoughts
Tackling your debt is a journey. It won't happen overnight, but every step you take is a step towards a less stressful financial life. You're not alone in this; we're here to support you with advice and encouragement all the way. Remember, you're taking control of your finances, and that's something to be proud of.
Now that you're armed with strategies to reduce your debt, it's time to take action. Knowledge alone isn't enough; it's the application that makes all the difference. I've overcome 6-figures worth of debt and learned valuable lessons along the way.
To help you avoid common pitfalls and 10X your debt-free journey, I've put together an EPIC Training for you:
