In 2000, my wife and I had high-paying corporate jobs and a part-time business. We made a lot of money, but our lifestyle didn’t show it. The reason? We had a debt of $ 120,000 (not including our mortgage), so most of the money we made went to pay off the entire debt. We were financially rich, but monetarily poor.
We had not lived extravagantly to create that debt. Rather, we had a couple of business failures, times of unemployment, medical and uninsured costs, and the daily cost of having five children. Now, we fully admit that we made some bad financial decisions along the way and that definitely contributed to the debt.
That’s the first stop in eliminating debt: taking responsibility for the debt. Stop blaming other people or bad luck. If you really look closely, I’m sure you will see, as we did, that the debt was caused by your decisions. It’s okay. Without conviction. Many people are in debt. This article is about how to eliminate debt.
So in 2000, we started looking for wisdom on how to eliminate our debt. We are praying, so we ask God first. The Bible says that if you ask for wisdom, He will give it to you in abundance and He did. We also seek the wisdom of people who have personally experienced debt elimination and from experts who teach people how to get out of debt. I suggest you do the same.
Here is the wisdom we receive (yours may be different):
1. Identify the debt. Our first step was to make a list of all of our debtors, the amount owed, the payment date, the interest rate, and the minimum payment. In this way, we had a clear picture of our mountain of debt.
2. Sell things you don’t really need. We sold our house and used the equity to pay off the debt. We didn’t have a lot of capital so it only ended up being around $ 8,000. It also lowered our monthly costs as we were able to find a smaller rental home. We then use the amount of the reduction to pay the debt each month. We also had several garage sales and were amazed at how much money we received for things we didn’t really need. Again, all of this money was used to pay off the debt.
3. Reduce expenses. Our first outage was that we removed our cable TV for about 6 months. Next, we did a few buys on our auto and rental home insurance and lowered that cost. We started using coupons and shopping sales and always used a list at the grocery store, which lowered our monthly grocery bill. We traded in two expensive new cars for solid old cars and lowered our monthly car and insurance payments. We stop eating out except once a month to celebrate our progress. We reduced the entertainment outside the home and started playing with the children at home. We eliminated espresso, sodas and other snacks bought on the go. We buy clothes only on sale and with coupons. These reductions added up to hundreds of dollars that were then used to pay off the debt each month.
4. Increase in income. We operate a part-time home-based network marketing business that increased our net income by hundreds of dollars. Again, we use this money to pay off the debt. This business continued to grow and now produces very good weekly income (although we have not done anything in the business since 2001). Since then, we have added a second business and an income stream. Also, every time we received extra money or had the opportunity to earn extra money, we put it into debt.
5. Put away your credit cards. We took all the credit cards out of our wallets and kept them in a safe place where it was not easy for us to access them. We promised each other that if we didn’t have the money, we wouldn’t buy something.
6. Budget. We set a budget, so we knew exactly what our income and expenses were each month, which helped us control excessive and unnecessary expenses. He also helped us plan payments and purchases.
7. Tithe. We believe in the principle of tithing, so we gave the first 10% of our income to our church God and tested (as the Bible says we should) to see if it would open the floodgates of heaven and pour out as much blessing as we do. I didn’t have enough space for it. From the moment we began to tithe, we have never lacked for anything. Works.
8. Give. We also set aside funds each month to give beyond the tithe. These funds were given to people in need, ministries or non-profit organizations that were helping the poor.
9. Save. We didn’t have a lot to save, but every time we got paid, we saved a few dollars to build the habit of saving. Our goal (as recommended by Dave Ramsey (www.DaveRamsey.com) was to create an emergency fund of $ 1,000, so that when things needed to be repaired or replaced, we could pay cash, rather than load it onto a credit card. credit.
10. Snowball. Most of our debt was from credit cards or loans, so what we did was make a list of the cards and the loans and the amount owed. We first identify the account with the lowest balance. Then we made the minimum payment to all the other accounts and put all the extra money we had in that low balance account. As soon as we pay it off, we carry over that payment, plus the minimum payment we were already paying, to the next lower balance. We continue to do this, with the payment amount increasing each time, creating a snowball effect.
The end result of all this was that in 5 years we were debt free and thanks to what we learned in the process, we were able to remain debt free. Due to increased passive income from our home business and reduced costs of living, we were also able to achieve financial freedom in 2005 and now none of us have to work. So if you want to enjoy debt and financial freedom, you can follow these 10 steps. Now is the time for you to seek wisdom and get to work!