3 tips to get out of debt
Want to know why you seem to stay in debt no matter how much money you do or don’t make? The answer is not as complicated as you may think. Debt begins with mindset.
When I was younger, there was a person in my life who made me feel like a failure. I believed I had failed before I even started what I wanted to do. This became an obstacle in my life. It became my mindset. Creating a budget is the first step in getting out of debt, however, you have to believe that you can get make a successful budget and stick to it. If you don’t believe in yourself, no budget in the world is going to help you. I’m telling you that if I can do it, so can you.
- Create your budget
I know it’s easier said than done, but the budget has to be created. There are plenty of online apps that can help you with this. Mint is a good app that is user friendly. If you want to do it old school, then grab a pen and paper.
Separate your fixed expenses from your variable expenses. Fixed expenses are expenses that we have to pay every month, usually the same amount. These expenses can be car notes, mortgage, credit card payments, and daycare, to name a few. Variable expenses are expenses that we can control a little more. Some examples are entertainment, food, and clothing. Look for areas in your finances that you can reduce of get rid of. If you are paying a gym membership, but only go once a year, ditch the membership.
I had cable for years. We only watched a show or two a month. The cable bill was $100 monthly. That meant I was paying at least $50 for every episode I watched. Some months, the television didn’t get watched at all. That’s $100 wasted. Everyone in my family is too busy streaming their programs on personal devices for free or next to nothing. Cable is a variable expense. If you watch television less than you go to the gym, get rid of that too.
- Knock out small debts first
I once had a friend who told me he was paying his highest debts first. When I told him that he was supposed to pay off the smallest debts first, then double up on his payments on the next lowest until he pays that one off, he laughed at me and told me that I wasn’t smart. At the time, I was driving a BMW that I paid cash for and living in a $300,000 home that I also paid cash for. I was also retired. He lived in a mobile home that he owed more than it was worth and drove a Kia that was also financed to the max. That was ten years ago. He’s still working for someone else, and I’m still retired.
Everyone wants their mortgage paid off. In most cases, it’s their biggest debt. For the first few years, it’s mostly interest, so any extra money you apply to it will be absorbed so quickly, it will barely make a dent. Once you have everything else paid for, and can make chunks of payments on your loan, then focus on the mortgage. Until then, pay on your smallest loans and work your way up. Don’t worry if someone says you aren’t smart. You are a legend.
- Check your budget monthly
It’s normal for expenses to change every month. Maybe you got hit with buying birthday or Christmas gifts. Some months are worse than others: auto repair, tire changes, or home maintenance repair. On the flip side, maybe your income went up due to a side hustle or overtime. Make sure you adjust all changes accordingly. It’s the same reason many people on diets fail. They don’t keep track of calories.
A friend kept gaining weight, but couldn’t figure out why. I knew she picked up a stuffed chicken every week from a local store. She would usually split it up between her lunch and dinner. One day while I was shopping at the same store, I looked at the nutritional value sticker on the back of the chicken. It had 4000 calories. Needless to say, she never bought the stuffed chicken again, and her weight began to go back down.
It’s the same situation with budgeting. If you don’t keep track of it, the expenses will mount up, just like calories. Staying on top of every expense will help you to get rid of debt quickly.
Tracie Breaux is the founder of The Cash Queen and she’s passionate about empowering women to achieve financial independence.