The Quick and Easy Guide to Killing Debt Forever

Just like that, 2018 is already around the corner. A new year means a new you, and what better way to massively improve your life than to improve your finances?

Unfortunately, for most of us parasitic debt is draining away at our precious income. Whether it’s car payments, student loans, or the ever-fearsome credit card debt, most of us are shelling out hundreds that could be spent on enjoying the holidays or taking a much-needed vacation.

It doesn’t have to be that way.

Today I’ll go over a relatively simple but highly effective strategy to kiss debt goodbye forever.

Understand Your Debt

It’s hard to know how to get somewhere if you don’t know where you’re starting from. Even if it might cause a bit of discomfort or even panic, it’s critical that you spend some time taking stock of your total debt obligation.

Make a list of everything you owe: student loans, mortgages, car payments, credit card payments, etc. How much do you owe on each? How long will you be expected to pay each off? What is the interest rate on each?

Create Your Plan of Attack

One of the first things you want to investigate is lowering your interest rate on as many debts as possible. Many banks and companies are willing to work with you on it, especially if you’ve been doing business there for a long while and paying on time. This is one of the easiest ways to guarantee a lower payment over time.

Now that your interest rates are lower, it’s time to decide how you want to approach repayment. Generally, it’s best to make minimum payments on all debts except one, which you attack full-force until it’s gone. This laser-like focus is much more effective than spreading it evenly, because that keeps parasitic interest rates alive.

Some people, like financial expert Dave Ramsey, recommend starting on the debt with the greatest interest rate and working your way down. Since the largest interest rate means the most money lost every month, this is a quick way to free most of your debt payment. It’s a “eat the frog” approach, pushing you to do the hardest thing first so it’s all uphill from there.

Understandably, that methodology can require a lot of upfront sacrifice when you already feel like you’ve been restricted enough by debt. It’s easy to get discouraged that way, so some people recommend the opposite approach – starting with the debt with the smallest interest rate, making it easier to pay off. Since you get that (relatively) instant reward, it prevents burnout and keeps your motivation high as you chug through the more challenging debt.

At the end of the day, only you can say which of the two methods will work for your personality. Both roads lead to financial freedom!

Build a Budget

By now you’re well on your way to a debt-free life. Now it’s time to put your plan into motion with a budget that works. But don’t worry, budgeting doesn’t have to come with a sense of deprivation. Luckily for you, I’ve got a handy-dandy guide on how to set up a budget that works for you.

Sticking to a budget, even a good, lenient one, can be just as challenging as sticking to a strict diet. It pays to have a few tools under your belt to help keep you on track. Here are a few apps you might find useful if you’re serious about solving your money woes.

EveryDollar

EveryDollar is a fantastic introductory budgeting app for your smartphone. While the paid ($99) version allows you to automatically import and manage transactions, the free version is a perfect on-the-go way to watch where your money is coming from and where it’s going.

EveryDollar uses the “zero sum” method, ensuring that every dollar is accounted for and assigned. Some might see this as micromanaging, but it is the perfect solution for those “I don’t know where my money went!” moments. It gives you an honest look at your spending to see what those little money parasites are.

Personal Capital

Oh man. This app is just about as close to one-stop shopping as it gets with your finances, especially considering that it’s completely free. With this one app, you can monitor your bank account, credit card balances, investments, retirement resources, and budget. Check them out here.

Acorns

Let’s be honest. Investing can be scary if you’ve never done it before! What do I invest in? How much should I invest? How often should I invest?

And then there’s Acorns. I could go on all day about how much I love Acorns (I already did!), but basically it makes investing intelligently literally brainless. You simply hook up a credit/debit card and, when you make a purchase, it automatically invests the change. Spend $2.14 on a coffee? That last $0.86 automatically goes towards an investment across 7,000 promising stocks and bonds. Better yet, you can set it to automatically invest $10, $20, $50, or more every month without you thinking.

You can get started on Acorns here.

Bigger Checks and Smaller Bills

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At its core, financial health means making more than you spend. Chances are that if you’ve been up to your waist in debt that you’re done with going without and even more done with asinine advice like to stop enjoying simple pleasures like a $4 coffee or the occasional take-out for $20.

Here’s the thing: you don’t deserve to feel deprived.

Enjoy your coffee. Get lunch with that friend. And in the meantime, let’s go over some easy, even effortless, ways you can start saving (and making!) more money without having to put yourself out.

Save on Utilities

A surprising amount of energy can be saved by making just a few quick (and cheap!) changes to your utilities. Here are some of the most effective ones.

  • Wash your clothes in cold water. According to TreeHugger, the average American family washes about 400 loads of laundry per year. If you switch from doing every load with warm or hot water to cold, you’ll use only 4% of the energy.
  • Switch to a low-output shower head. Most shower heads put out about 5 gallons every minute! Buying a low-output shower head can reduce it to about 1.5 gallons a minute, which can really add up if you take longer showers and if there are multiple people in your household.
  • Program your thermostat while you’re out of the house. Any time you’re out of the house, see if you can adjust your thermostat a bit. By making it more lenient while you’re away – hotter in the summer and cooler in the winter – you’re saving energy and money that you wouldn’t have missed anyway. Better yet, if you have a “smart home”, you can program the thermostat to kick back to your comfortable temperature an hour before you get back. All the gain with none of the pain!

Save on Groceries

There’s a better way to save on groceries than spending hours cutting out coupons. With Ibotta, coupons are literally just a click away. Before you go shopping, you choose what items you want to pick up, answer a quick question or watch a tiny ad, and then snap a picture of your receipt after shopping to get a great rebate. You can redeem your rebate as a gift card for anything from Whole Foods to Walmart to Amazon.

You can start saving here.

Make Easy Money

No matter who you are, we could all benefit from a little side income. But it doesn’t take a business degree or a 50-page business plan to make it happen. Here are some of my top recommendations to put a little (or a lot!) into your pocket this month.

Get your side hustle on

A side hustle can be a great way to add steady, reliable income to your life. It can be anything simple and straightforward like house cleaning and babysitting, or more involved like website or app development. Checkout codecademy.com or Udemy.com if you’d like to learn more technical skills that can command higher prices.

And if you’re not quite sure what you’d like to try, I have a handy list of 10 sidehustles you can start for $100 or less here.

Sell Old Stuff

Most of us have entirely too much stuff: old books we’ll never read again, clothes that no longer fit or match, furniture, and just plain junk. While garage sales are enough to make the average person shudder, there’s a ray of hope: eBay. By going through his old junk and selling it on eBay, this man was able to net $500 in just a week’s time. Not so bad, huh?

Attack Your Debt

Now that you’ve got a budget in place and a plan to stretch your money further, it’s time to get down to business and get that debt paid off. Remember to take it one bill at a time and try to use some of your newfound income and savings towards your debt. You’re well on your way to being a completely debt-free person now!

And to help make it easier for you, I’ve got a handy-dandy debt repayment worksheet. Be sure to grab it below! 🙂

How is your battle with debt coming along? Be sure to share in the comments!

xoxo,

Tabitha

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