Easy Ways to Get Out of Debt!
I recently posted on Facebook to ask the women around me what is their number one money worry. I heard tons of answers ranging from retirement to paying for kids college, but the absolute number one reply was #gettingoutofdebt. It makes sense that would be a huge worry for other #bossladies because how can you think about retiring, college, vacations, paying off a mortgage or other #financialgoals when you are saddled with credit card, student loan, car and other bad debt. Debts can feel like a giant black cloud over your head that weigh you down and lead to stress, sleepless nights and anxiety. In fact, the stress over debt has lead to numerous divorces, rash financial decisions and not-so-happy homes. We have to find a way to minimize or get out of debt if we are going to live our best life #bosslady, but in good news, I have some very easy solutions of how I handled getting out of debt the numerous times in my life when I have found myself in it.
Here's the great news-you are not alone. In fact, the average American has around $38,000 in personal debt (not including home mortgages)-more than half of the average income of around $56,000/year. Northwestern Mutual reports that in 2018 at least 20% of Americans spent 50-100% of their annual income to cover debts. It's no surprise that for every age group, women carry significantly more debt than their male counterparts. This can be attributed to the wage gap, higher student loan debt and more impulse spending than men. Each generation has various sources of debt: car loans, student loans, credit cards, mortgages, etc with Millennials citing student loans as their biggest debt, Gen X and Y showed high mortgage debt and Baby Boomers number one debt was credit cards.
How do we get out of debt? It really doesn't matter what generation you fall into, the formula is basically the same and is possible to actually get out of debt (if you are willing to do the work). Depending on how far in debt you are, it may take months or it may take years, but if you don't start now you will only delay an awesome debt-free future. Are you ready to do the work? If so, here are some simple steps to take:
1. Sit down and make a spreadsheet/journal/whatever works for you list of all of your debts and their corresponding interest rates. All of them. Do not leave any debts out here.
2. Now, I want you to organize your lists into two lists. On list one, start with the highest interest first and organize down to the lowest interest. List two should start with the lowest total balance and go to the highest balance.
3. Step back and look at your lists. What sticks out? Do you have a credit card with a 30% interest or a loan with a small balance? What debt would be the easiest for YOU to knock out first?
When I did this the first time, I had a credit card with about a $600 balance and 15% interest rate and a personal loan against my car with a $2500 balance but a higher interest rate at 18% (plus student loans and other debts-but these were the two most manageable for me). Now, I know conventional wisdom says pay the highest interest first, but I needed to feel progress and to at least take one debt off my way-too-long list. So I chose the credit card. It's up to you if you choose the higher interest or lower balance, but I want you to pick one that can realistically be conquered in the next six months.
4. Okay, now you have chosen your first debt to conquer. I want you to pay the minimum balance on all of your other debts for now and focus paying all extra money to the balance that you chose. I don't care if it's $50 more a month or $500 more a month, any extra money that you have needs to go to paying off this debt. That may mean no shopping trips or lattes until your debt is paid, but I promise you how you will feel when you get it paid off is way better than any caffeine!
5. Pay, pay, pay until you get that debt paid off. Then, reward yourself! And NOT with anything that will get you into more debt. Go get that latte, eat at a nice restaurant, buy the shoes...but do NOT go into further debt. Celebrate with one small reward and then.....
6. Move onto the next debt and do it all again!
With time and tenacity, you will eventually get your debts paid off. During your debt pay off period keep in mind a few things:
1. Nobody "deserves" fancy things. You can forego the splurges until you get your financial house in order. Resist temptation and peer pressure and get ready to live a lower stress life.
2. You MUST live below your means-not only during your debt pay down period but for the rest of your life. Simple hacks that I do-borrowing dresses and clothes from my girlfriends for special events instead of buying things I will wear once, searching Craiglist for furniture I can refinish rather than spending beau coups bucks on new stuff, cooking at home rather than eating out.
3. Do not go into further debt. I know your car may break down or there could be a true medical emergency...but #bosslady, if you really want to get out of debt I need you to commit and only falter when there really is a life changing emergency. Stop making excuses.
4. Did I mention #stopmakingexcuses? Debt is like fat. I have every excuse in the world NOT to go for that run or to the gym; it's too cold, I have work to do, my family/friends/coworkers need me..and on and on and on...we all have excuses. We all have 24 hours in a day so how do high level CEO's make time to work out but I can't? Simple-excuses. The same goes for debt, I don't care how much or how little you make, there are people that are debt free at EVERY income level. And there are people that have had way less and WAY more debt than you that have done it, so stop making excuses and get ready to get rid of that debt!
Good luck #bosslady, I know you can do it!