debt reduction tips

The First 4 Steps to Debt Reduction

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If you may recall, my first step for women hoping to manage their finances was shiny and happy; Adopt A Healthier, More Positive Attitude about Money. Now with Goal #2, it’s time to battle my archnemesis, a terribly ugly villain named “debt.” For me, debt reduction is a huge priority.

Debt comes in many forms and, if you believe the experts, none of it is good. In Dave Ramsey’s The Total Money Makeover, he is quite emphatic that the concept of debt as a tool to create prosperity, or improve your credit rating, or to protect your purchases, are all myths. I believe that debt is a weight on one’s soul. You become beholden to someone else and that feeling is a heavy one.

Your sense of “owing” steals from the joy of “owning.” There are things to do before actually battling the debt monster. And, trust me, they aren’t all fun so pull up your Wonder Woman UnderRoos and get ready to rumble.

STEP 1: Cut the Cards (Don’t Close the Accounts)

Years ago I came to the conclusion that credit cards are the devil. I woke up to find myself in significant credit card debt AGAIN! I had already been bailed out once in my 20s (thanks to my dad) and dug myself out twice. And yet there I was, staring at credit card statements.  It was then that I swore off credit cards. SUCK IT, AMEX.

STEP 2: Run the Numbers

All the experts ask you to list out all your debts. Make sure to include the most current balance and the interest rates. Sounds simple, right? Well if you are like me, this is a very difficult task emotionally. But it’s necessary for you to hold yourself responsible for the debt hole you are in so you can find the courage to climb back out. Suck it up and make the damn list.

STEP 3: Get Serious

There are varying strategies to debt elimination. Educate yourself about your options and select one that works best for you.

I am trying the Debt Snowball Method made famous by Dave Ramsey, with a small twist.

Essentially, you list your debts from smallest balance to biggest balance. The twist I put on it is that I put priority on my debt to family and friends, regardless of balance. Emotionally, it just felt right prioritizing my best friend over a huge financial institution.

For the “snowball” to work, you create a budget that allows you to pay the minimum monthly payments on all your debts and plow any extra cash toward the debt on the top of the list. Once that is paid off, you plow that debt’s payment plus the extra cash toward  the next on the list…and so on.

Side note: I have considerable tax debt. Don’t miss around with the government. Call them. Sit on hold as long as you need to. Be nice. Ask for help. Request an installment plan. Answer questions. Be nice. Pay on time. Follow up periodically. Be nice. Essentially, don’t get yourself into a position where they levy your bank account or paycheck. NOT NICE! 

STEP 4: Be A Happy Squirrel

Plan for expenses and save for a rainy day. Everyone knows that, right? But guess what? Most people don’t save. 

Wanna hear a super secret? I have NEVER had any money in savings. There were a billion excuses why I couldn’t save…not enough income, too many bills, too much debt, “things just came up,” etc. Well, it’s all bullshit. Everyone can save money. Even me. Even you.

By addressing your debt and squirreling away for the future, you are breaking bad habits and owning your future. Currently, my savings account balance exceeds my checking account balance. THAT has never happened. I am one helluva happy squirrel!

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