In my last blog post, I spoke about planning to get out of debt and how to move forward toward the goal instead of just saying you are going to get out of debt. Part of moving forward and part of the planning stage is deciding which way of getting out of debt is best for you. It is important to note that either way works and whichever one you choose, if you keep going, will get you out of debt. But it is vital to your success that you pick the one that will work for you. And if you pick wrong, you can always switch later on. The most important thing is that you are getting rid of your debt and setting yourself up for building wealth and reaching financial freedom.
So let’s explore the two most popular methods:
Debt Snowball – This is by far the most popular way because you can see immediate progress and quicker progress in order to keep you motivated in the beginning. The snowball method has you listing all of your debts in order – the smallest one to the largest one – and paying them off in that order. This method doesn’t take any math into consideration – it’s all about emotion. You may pay a little more interest depending on your situation, but it won’t be enough to quibble over. And in most cases it will be less simply because you will stay motivated, finds ways to save and earn more and pay your debt off faster than you originally planned.
Debt Avalanche – This method helps all the math nerds out there. The avalanche method has you listing your debts in order by the interest percentage that you pay. The pro of this method is that you can save some money using this method. However, the con of this method is that many times your lowest interest debt can be a large one. Therefore, it may take months or even years to pay off just one debt. It can be a challenge to stay motivated in this scenario.
Let me repeat – the most important thing is that you pay off the debt. Getting rid of the debt is vital to your wealth building journey. It doesn’t matter which method you use – they both work. You want to pick the one that will work for you. I used the snowball method because it was extremely motivating to me when I paid off 4 debts in one month. This helped me to begin to feel freedom and kept me going when the debts got higher and higher and took longer to pay off.
So as you being to develop your plan to get out of debt, take the time to be honest about which plan will work for you. And if neither one suits you, make your own. You need a plan and you need to start taking steps immediately toward getting rid of your debt. Doing so begins your awesome journey to wealth and financial freedom.
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Anyone who has debt says this all the time. Nobody wants to stay in debt. However, getting out of debt takes more than just words and intentions. It takes action and a plan. In my podcast this week, I go in depth about how to take action and how to develop a plan yourself to get out of debt starting today. In my last blog post, we talked about how planning is something you can do immediately to begin the journey to wealth and financial freedom. So let’s look at how to plan to get out of debt successfully and as quickly as possible.
No one would ever build a house without a blueprint – a visual of every aspect of the house and a plan on how to build it successfully. And that’s what you need to get out of debt – the first step is to develop a blueprint. This is a visual of your finances – your real finances. This first step is actually what keeps most people from ever getting out of debt. They don’t want to walk in their truth, so they stay right where they are. If you are ever going to successfully get out of debt, you are going to need to be honest about your financial situation and be true to what you are willing to do to change it. You need a list of all of your income and all of your expenses – this includes accounts in collections. You need to know exactly what you owe in order to develop the best plan to pay it off.
Once you have your blueprint in place, you need to figure out the best plan for you to pay everything off. I want to caution you about paying for this. Most of the “debt consolidation” programs charge thousands of dollars and basically all they do is get you behind on every bill so they can get you a settlement offer. Doing this will make your credit score even worse than it probably already is. Once your score is damaged, it takes a long time to build it back up and even though you hopefully aren’t going into debt again, your score is your financial reputation and should be kept at a good number. We offer a coaching service and something like that is okay – getting advice from someone who’s been there to support you is one thing, but you don’t want to pay thousands to a company for something you can do yourself.
So now you know what you owe – next, you need to figure out how to pay it off. Using either the debt avalanche or the debt snowball method, you want to arrange your items in the order you want to pay them off. I always recommend the snowball method because of how quickly you can pay off items in full, but pick the method that will work best for you and keep you motivated. Once you start seeing debts being paid, you will continue to be motivated resulting in more sacrifice and more ideas on how to bring in more income. Developing a plan and actually starting the process are the keys to success when it comes to paying off debt.
I hope after today you will stop saying “I plan to get out of debt” and you will start getting out of debt by developing a plan and taking the actions required to finish the plan as quickly as possible. Even without any extra money, if you stop using debt and continue to make all of your debt payments, you will eventually be debt free. But your goal should be to take actions that get you there as quickly as possible so that you can truly begin your journey to wealth and financial freedom.
I am currently sitting in the Atlanta airport waiting to catch a plane home after spending 4 weeks in SC taking care of my parents. As I am sitting here, I am reflecting on how financial freedom played a role in that. You see, most people wouldn’t have been able to leave their home or their job for 4 weeks to do something, even if it was necessary like my situation was. However, many years ago, I had a big aha moment and realized that debt wasn’t taking me where I wanted to go. So I developed a plan to change all of that. And now, I enjoy financial freedom – the ability to not worry about being away from home for 4 weeks. Most people would not be able to leave their jobs – most can’t go 4 days without pay, much less 4 weeks. Financial freedom has given me the ability to own my own business and have no worries about whether or not I could afford to be away. When I got the call and needed to be there to take care of my parents, it was a no brainer – something that financial freedom brought me.
I want that for all of you. I want y’all to be able to not have to worry when life happens. Today, I am going to share 5 things that you can do immediately to begin the journey to financial freedom – there is no need to wait. Let’s talk about them.
- No More Excuses – You need to stop all of your excuses as to why you can’t get out of debt, save money and also stop your “reasons” as to why you “need” something now and it just can’t wait. We all have an excuse bag. I had a huge one. It’s a bag that we carry around every excuse in the book in and are at the ready to pull them out when needed. Stop being a victim. Stop making excuses and start making a plan to pay off your debt, build your savings and reach financial freedom. I did it with $200,000 in debt – you can do it!
- Save Something – We all have an excuse as to why we can’t save money. But without saving money, you will never have any extra. Do you think I reached financial freedom without saving for a rainy day. You need an umbrella – it is going to rain and like most storms, there won’t be any warning. Start somewhere today – automate $10 to come out of every paycheck – today! No matter how much debt you have, do this one thing. And when you build that muscle up, raise it up and soon you will have a rainy day fund that can cover any emergency and like me, you will be able to jump on a plane, no questions asked, and help someone.
- Live Within Your Harvest – This simply means live within your means. We reap what we sow and what we sow is our harvest. What you earn is your harvest. If you keep borrowing against a future harvest, you are going to owe more than you can possibly pay back. Stop using debt today. If you stop today, and just pay your payments, you will eventually be out of debt even without a plan. A plan will simply get you to financial freedom quicker. Stop using debt to get what you want. Debt will never bring wealth.
- Develop a plan – No one builds a house without a plan and you will not build wealth without a plan. Whether it is a plan to get out of debt, a plan for retirement, a savings plan or a spending plan, you need plans in your financial life. Don’t go through life willy nilly – living on what’s in your head. Develop a plan and you will have success in all areas of life.
- Believe in yourself – If you don’t believe you can, you won’t. It’s that simple. Believe you can reach financial freedom. I believe you can because I did and if I can, anyone can. Believe you can and you will.
These are 5 things you can start today that will bring you wealth and financial freedom. They are the top things I did when I decided to pay off $200,000 in debt. It wasn’t instant and it definitely wasn’t easy, but it was worth it. Financial freedom will bring you a peace beyond understanding and especially in those moments like I have had recently. Financial freedom is worth every sacrifice. It is freedom!
Listen to Debbi’s podcast episode on this topic right here!