5 Essentials To Paying Off Debt

1. Understand the WHY before the HOW

I believe this is the most important step in becoming debt free! In the hundreds of financial coaching sessions that our team has led, it’s amazing how many people do not have a plan for their lives. We ask them the “why” and they stare at us like we’re speaking a different language.

Unfortunately, this is the first time that many of these people have ever seriously thought about what they want to accomplish with their lives. As a result, they are bumbling through life just trying to make it through the day. What a miserable way to live!

I cannot overstate this fact – YOUR LEVEL OF EXPECTATION DETERMINES YOUR LEVEL OF PREPARATION!

2. Calculate your Debt Freedom Date

  • Who do you owe?

  • How much do you owe?

  • What are the payments that you are ACTUALLY making?

You can list these on the Debt Freedom Date Calculator. Now we can calculate your debt freedom date! This date is simply the date that you will be debt free (including and excluding the house).

3. Accelerate your debt elimination

  1. Reduce Interest – Many people with substantial consumer debt do not realize that 50% – 75% of their payments are merely going to the lender as interest. This greatly reduces your ability to lower your debt. So, here are a few ways to lower your interest:

    • Transfer to a 0% Interest Credit Card (Learn more HERE)

    • Call & ask for a lower rate

    • Pay on-time

    • Establish automatic payments

  2. Increase Income – Since we’re all friends here if we’re being completely honest, we all vote for this option, right? But a lot of people don’t realize that there are numerous ways to increase income that are within your hands. Here are a few:

    • Pay Raise (see salary.com)

    • Tax Refund

    • Bonus

    • Work Overtime

    • Extra Job

    • Sell Some Possessions

  3. Decrease Outgo – This is an option that is always available to us, but it’s probably not fun. If you can decrease the outgo to other things, you can increase the outgo to liberate your life from debt!

    • Create and follow a budget!

    • Sell some possessions

4. Use the Debt Snowball Technique 

  1. List ALL debts from the smallest balanced owed to the largest.

  2. Pay the minimum payment on all debts except the smallest one.

  3. Pay as much as you can on the smallest debt.

  4. When the smallest debt is eliminated, take the monthly payment you were paying for that debt and add it to the monthly payment you’re making on the second smallest debt.

  5. Continue this process with a vengeance until you are debt free!!

5. Establish Accountability

  • If married, work together with your spouse. If unmarried, have someone you trust (someone who has won with their money) hold you accountable!

  • Plan your spending every single month!