5 Simple Steps To Making Your “Get Out Of Debt” Resolution Stick - Part 3
January 7, 2009
Welcome back! Over the last couple of posts we’ve looked at why it’s important to have a plan for getting out of debt, and how to get started with it. If you haven’t read those posts yet, you should go read Part 1 and Part 2 first.
If you have read them, and taken action on the information in them you should now know how much debt you’re actually faced with, and roughly how long you can expect it to take to get it paid off completely.
NOTE: The single biggest secret to a successful New Year’s resolution - no matter what it might be - is taking action. Nothing is going to happen until you take that first step of actually doing something to reach your goal.
In Step 3 of this process, we’re going to look at ways to shorten the time it’s going to take you to pay off all your debt. So let’s get on with it…
There’s no magic to this. In fact, this next step is going to sound so simple and obvious, you’re probably going to be saying “Well no kidding!”
Here it is: To get your debt paid off in a shorter time, you need to pay more towards it every month.
(See, I told you it was going to be simple and obvious!)
Easier said than done, right?
Yes, I’ll admit it’s an easy thing to say but not always so easy to do. But I’m willing to bet that there are ways you could do it if you sit down and really examine where your money is going every month.
Here’s what you need to do for this step:
- Get out your bank account and credit card statements for the last 2-3 months
- Go through them and make a list of all the recurring payments - that is, payments that you have to make over and over, whether every month, every quarter or some other timeframe. This will include things like car payments, utility bills and mortgage payments but it will also include things like website fees and health club memberships.
- Make a list of all the things you spend money on regularly - restaurants, movies or other entertainment, clothes, or whatever your particular “vices” might be
If you use cash for a lot of purchases, you’ll need to start tracking your spending for the next week or two - long enough to get a good idea of where your money goes.
Now what you need to do is go through this expenses list and find anything that you can either cut back on or eliminate completely.
You need to be ruthless about this if you want to reach your goal of being debt free as soon as possible:
- Can you cut back or eliminate your cell phone fees?
- Do you really need to eat out once a week?
- Could you pack a lunch to work instead of buying it?
- Is there a way to drive less to save money on gas?
- Could you cut back to basic cable instead of the whole entertainment package?
- Do you need to have a landline phone AND a cell phone or could you eliminate one of them?
- etc…
Look at every single item on your expense list and really debate whether it’s critical to your life. Some might seem like you couldn’t do without them, but I suspect if you gave them up for a month you wouldn’t miss them as much as you might think.
What you’re trying to do here is free up as much money from your current expenses as you can so you can use that to pay down your debt faster.
In the next step, we’ll look at how to use the money that you generate to start paying off your debt. Stay tuned…
In case you’re coming into this series in the middle, here are the links to the rest of the steps:
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