So this post is about debt. Getting out of it, specifically. I mentioned in this post that getting out of debt is about 30% planning and 70% attitude. We're about to talk about the attitude part of it, because it is major. Trent and I paid off $20,543.08 of debt in 2012 and it was only partly due to my intense financial spreadsheet file. A lot of it boils down to how you attack it. So here are some things to consider when preparing for your own Operation Debt Smackdown. Yes, that is actually what I call our debt reduction plan.
If you are just content chugging along making minimum payments on student loans, vehicle loans, credit cards, etc, it is going to take foooreeeevvveeerrrr to truly wipe out your debt. You have to make a conscious decision to pay attention to it, and go over and above the minimum payments. You have to decide that your debt is crampin' your style and you want it GONE.
Stop getting into more debt.
This is hopefully a big DUH statement. You are going to make zero progress in your debt smackdown if you keep getting into more debt. Duh. So stop. If you think you can't stop, that you can't afford life without using the credit card or taking out a loan for your next car, then maybe you need to evaluate what is going on that credit card and maybe you don't need a new car. Basically, if adding onto your debt is a normal way of life, you may need to tone down your lifestyle...just sayin'.
Find extra money.
Ok, I don't mean just go poking around in your coats that you put away when winter ended and hope there's a $20 in the pocket. I mean evaluate your budget, see where you can cut back and see how you can bring your regular spending well within or below your income level. If you are hardcore serious about getting rid of debt, maybe it's time to be hardcore serious about cutting cable or shopping consignment or just not shopping at all.
Treat extra money as extra smackdown power.
Once you find that extra money, do not just treat it as extra spending money. So tempting. It can be extra spending money after you get out of debt. For now though, you need to treat it as extra smackdown power. If you cut $40 off the cable bill as part of your Operation Smackdown, that is $40 extra each month that must go towards debt payment of some sort. I have a line item in our budget for "Car Extra", for example, and the money we come up with as extra debt payment is treated as if it were a non-negotiable bill.
Keep track of your progress.
You will feel SO much better about cutting cable or nixing that shopping or not blindly spending that extra money if you track how much effect it has. In my next money post, I'll show you the nitty gritty of creating a debt reduction plan (more spreadsheets...) and give some guidance for how we track original balances, current balances and how much we paid off each month. It is a major boost to see those balances dropping and that "paid off" amount increasing!
Focus on one item at a time and KILL IT!
If you decide your first victim is your car loan, yes keep making minimum payments on everything else, but you focus in on that car loan, throw your extra money at that car loan, and chop that balance down. This gives you momentum. You can see the progress quickly on that one item and once you get it paid off and killed dead, it feels gooooood. Then you know what? All that normal money and extra money that you were paying to your car loan can be paid towards your next victim, in addition to the minimum payment you were making. Your cash flow snowballs and soon you'll be making giant payments and knocking debt OUT.
Do you think I'm crazy bonkers now? I'd like to say it's just because of tax season, but it's true, I'm cookoo for debt smackdown. I love plunking our extra debt payments into our budget. My overtime money is being thrown at Trent's car loan right now. There are abundant high fives and much celebration in our household when something gets paid off. The light at the end of the tunnel is getting brighter and it feels goood.
Just so you don't think I'm the only crazy one, I'll leave you with a quote from Dave Ramsey, the money man himself:
"Get all Braveheart on your debt. Go crazy, paint yourself blue and charge into the chaos with fierceness."
Love this post! Definitely love your money series. I have school loan payments and a car loan that I have to pay off- which is daunting since I started a new job just a few weeks ago, which is signifigantly less than what I made at my last job. Any advice for people trying to give debt a smackdown on a very small budget to start with?!ReplyDelete
We have found ourselves in a similar situation since my husband now only has one part time job instead of two added together and is going to grad school. We still have plenty to make ends meet but our smackdown power has diminished a lot. It's kind of tricky and frustrating because it feels like we don't have much debt reduction momentum anymore, but we are still putting some extra to debt. My suggestions, and some things we are doing, is to:Delete
a) Just really evaluate your budget and see what you can cut out. We have canceled our home security system that we never really used, we are canceling data plans on cell phones as they come around to the contract end and (gasp!) are headed towards just having regular cell phones only, my husband takes the city bus to seminary each day to save on gas. Everyone's expenses are different, but just try to be really attentive to what you could cut back on to find some extra available money, even if it's a sacrifice.
b) Know that any amount over the minimum payment is a GOOD thing, even if it's small. You are shortening your overall time period of paying on that debt and therefore lessening the amount of interest you will pay total.
c) Pick the smallest debt balance and attack that first. It will go away sooner than others and give you a mental and actual boost towards tackling the next balance.
I hope this helps a little. I commend you for wanting to be proactive about this!