Last week, we discussed eight
ways
to build a budget. One of these was eliminating debt, which quite honestly,
deserves a post of its own. Debt can be all-consuming, but it doesn’t need to
be. While it is easy to fall into and much harder to get out of, becoming
debt-free is not unattainable! Millions of people have done it; but it will
take dedication and the ability to see the bigger picture, beyond a sea of
minimum payments.
With all of this in mind, debt-free living requires a
plan. It is not an overnight decision, but a collection of weeks, months, and sometimes years of choosing to eliminate debt.
We suggest beginning by listing out your debts.
Putting pen to paper will allow you to see exactly what you are dealing with,
and how you can start eliminating payments. Once you can visualize exactly what
you’re working with, the next steps will seem easier to take on.
One of the most popular strategies? Target one debt
and get to work. You can choose the debt with the highest interest rate or the
one with the smallest balance. Monetarily, you’ll save more by paying higher
interest rates, but motivationally, you might find it more exciting to pay off
your smaller debts first. Dave Ramsey calls this the “Debt
Snowball.” He suggests listing your debts from smallest to
largest and knocking them out, in that order. Of course, continue making
minimum payments on the other debts, but this intense focus can help you
eliminate debt faster than trying to tackle them all at once.
Maybe you’re too stuck in “minimum-payment world” to
even attempt the Snowball Method. Baby steps! Every month, work on paying a
little more than the minimum payment. Paying the minimum every month will keep
you in debt for a very long time, and you don’t want that. Pay a little bit
more each month, helping your overall balance, and how much you’ll have to pay
in interest.
Want something completely different? Before we
introduce this strategy, you must know that it can definitely be dangerous for
those with debt issues to open new credit cards. However, the balance transfer
strategy can be extremely effective if executed carefully. If you’re dealing
with high-interest credit card debt, but you’re certain you can pay it off in a
few months, consider moving the debt to a card with a zero-interest
balance transfer. This definitely requires an attentive
eye, because if you forget to pay off the debt before the balance transfer
expires, you’ll find yourself in more debt than before. If carefully navigated,
the 0% interest can be beneficial, but if it’s at a risk of finding yourself in
more debt, it may not be worth it for you.
However, even after all of these tips and tricks, your
debt may be too large to conquer on your own. If you’re finding yourself
completely overwhelmed, don’t be afraid to reach out and ask for help! There
are plenty of people who have been in your place, and plenty of people who have
found their way out. One of our favorites is Dave Ramsey’s Financial Counseling.
His team of coaches are trained to create plans specifically tailored to your
situation. Once you’re on board, your individual coach will meet with you to
discuss your current finances, discover your goals, and help keep you on track
as you eliminate debt.
No matter whether you decide to save money where you
can, or develop an entirely new budget to keep yourself in line with a
debt-free life, the most important part is deciding to start. The hardest part
of the entire process can be making the first step. Once you’ve acknowledged that a change must be
made, you can begin to take steps towards getting yourself out of debt. It may
require some outside help, you may slip up a few times, but consistency and
dedication are the keys to seeing change occur in your financial situation.
If we at Kemp Harvest Financial Group can
help you in any way with regard to your financial planning needs, please feel
free to contact
us.
For more topics like this, check out our radio show
“Retirement Plain and Simple” every Saturday morning at 8 on WNPV 1440 AM
and like
us on
Facebook!
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