One way or another, most of us are in debt. However, none of us planned to be in it. Eliminating debt is a very serious goal in our lives. Once you have decided to make it a priority, you need a plan that you can follow to a goal you can achieve. Debt elimination requires commitment and strategy. Without strategy, our efforts can be misdirected and counter-productive.
Debt elimination also requires a certain amount of sacrifice. However, you don’t need to make yourself into a martyr. You can’t just say “I’ll stop buying shoes” or “I’ll never go to the movies again”. The sacrifices we make to eliminate debt need to be relevant and impactful. You want to eliminate debt in order to improve your quality of life. Resigning yourself to being unhappy or denying yourself basic needs will defeat you before you even start. Having a debt elimination strategy avoids wasted effort. The strategy is different for each person and should be based on factors like income, monthly expenses and shopping habits. Although the actual plan is up to the individual, here are three basic steps every strategy should include:
1) Stop Borrowing – Stop using your charge cards. Hide them from yourself. Remove them from your wallet and put them safely in a drawer. We forget that we are not “buying” with a card but borrowing to pay the vendor. We pay a heavy fee for the privilege of paying with someone else’s money. Don’t take out long or short-term loans and don’t open anymore credit cards. Think of each charge card as a link in a chain securing the shackles of debt around your ankles. Just say “no”.
2) Increase Your Monthly Payment – The “minimum monthly payment” is specifically calculated to keep you in debt for as long as possible. They never want to be paid off because as long as you owe them money, they can charge you interest. When you pay more than the minimum payment, you get closer to paying the principal. The principal is the actual amount you borrowed or charged. If you really want to see your debt shrink, pay double the minimum payment, or as much as you can afford each month.
3) Save Money Whenever Possible – It is going to take more than not charging to eliminate debt. In order to free up money to pay off debt, you have to cut back spending all the way around. If possible, cut back on monthly expenses. Identify unnecessary spending and cut it out. Sacrifice is easier when it is for an attainable goal.