04 Apr 9 Steps to Getting Out of Debt (Part 1): Damage Control
Consumer debt is one of the biggest plagues to us in western nations because of how easy it is to access. It has become a detriment to our nation, and it prevents us from building wealth! Too many people are shackled to debt. We need to learn to break free and become the masters of our money! This blog post is going to teach you the nine steps to getting out of debt for good!
First, though, I want to illustrate for you how debt can destroy our power to get wealth. If you purchase a $2,000 tv with a typical credit card, it will take 31 years and 2 months to pay off the balance by making the minimum payment. Read the fine print. You will end up paying a total of $10,202 for a $2,000 tv. That’s $8,202 . in interest alone at a 19.8 percent interest rate!
Debt tends to bury you because it compounds. If you aren’t currently in debt, I encourage you not to start! As I’m sure many of you know, it can be incredibly difficult to get out.
Foundations of Wealth Building: Getting Out of Debt
Step 1: Cut up or freeze all but one credit card
Break out the scissors and destroy those credit cards. Just keep one card! You need to keep that one card because you want to keep the credit lines open. Then, literally, get a metal coffee can, fill it with water, place that card into the can and stick it in your freezer! It has to be metal so you can’t microwave it. By the time the water has melted, hopefully the desire to use the credit card for an impulsive purchase will have passed. You’ll have time to think through the decision.
Step 2: Pay off current charges every month or stop using the card altogether.
If you decide not to freeze that last card, you need to get serious. You can keep using it, but you need to make sure to pay off the current charges each month (and even better, switch to a debit card). The key here is to be religious. If you charge $200 on that card, then at the end of the month, you need to commit to paying that $200—not $10!
Step 3: Make the minimum payment on all debts.
This is where the secret sauce starts. Don’t be sporadic in your attack on debt. Start a rhythm. In a moment, I’ll show you how to really accelerate this plan of attack. But for now, let’s establish a base. Make the minimum payments regularly on all of your debt. It might take a little while to get into this rhythm, but it’s your first real platform to reach in order to move forward in eliminating debt. Then you can start accelerating your debt eliminating process.
Step 4: List your current debts.
List your mortgage, car debt, credit card, school payment, etc. on a spreadsheet. List the debt, the balance, and your current monthly payment without the taxes and insurance. We just want to look at the hard number here. Next, divide the minimum monthly payment into the balance to find the number of months it would take to pay off each debt.
These are the initial steps you will need to take to begin to get out of debt. Next week I will be sharing with you the action steps! I am always working to provide the best content for you all, so could you do me a favor? Comment below what money topics you want me to talk about this month! Is getting out of debt helpful for you?