Get out of debt now! You hear it all the time – and you want to get out of debt, you really do. What’s stopping you? Once you know the 3 simple steps to be being debt free, you will wonder why you did not do this sooner.
I love Dave Ramsey of the Dave Ramsey Show and I agree with his philosophy of living debt free. I don’t happen to believe, like Dave Ramsey, that you have to live on “rice and beans, beans and rice,” to get out of debt. But you do have to live below your means.
Talking to people I love who are plagued by debt, I had a revelation. They aren’t in debt just because they spend a lot, love to shop like Rebecca Bex Bloomwood in the movie, “Confessions of a Shopaholic.” They are in debt because they haven’t progressed through the three steps I will now outline.
Step ONE for getting out of debt: To get out of debt you have to SHIFT YOUR ATTITUDE about money.
You have to stop trying to impress other people.
You have to stop buying things out of guilt (because your children asked for something).
You have to stop telling yourself you “deserve” the item because you have a good job or make X amount of money. It’s not what you make but what you keep. And you aren’t keeping anything if you are in debt.
Step TWO for getting out of debt: To get out of debt, you have to SHIFT YOUR HABITS as it relates to money. This is where you take your children to the library or park when they want to be entertained instead of to a movie.
Instead of paying for Little League baseball when you are in debt, you ask relatives if they would like to “sponsor” your child in Little League as a birthday or Christmas gift. (Make sure they write a thank-you note and send photographs of them looking adorable in their uniforms.)
You don’t spend money on gourmet coffee at the drive-thru when you can make it at home.
You don’t pay people to mow your own, clean your house or clean out your car.
You don’t spend money on expensive diets (You should save money when you are on a diet. After all, you are eating less).
You don’t eat out a lot and when you do, you don’t order expensive alcoholic drinks or appetizers.
Step THREE for getting out of debt: To get out of debt, you have to SHIFT YOUR BUDGET. This is the time when you really sit down and do the numbers on what you make and what you owe. You realize that in order to become wealthy (your new goal), you must live below your means.
To get out of debt you can follow a variety of formulas such as those offered by Dave Ramsey or Suze Orman, but I recommend starting out by saving 10 percent of your money for retirement with an automated system such as putting 10 percent of before-tax money into a Roth IRA every pay period.
Save another 20 percent into an Emergency Fund (in a regular savings account) and then 70 percent keep for paying off debt and living. Once you have at least 1,000 (per person in your household) in an emergency fund, you can then use that 20 percent money to pay off debt as well.
Once debt is paid off, you will continue to save 10 percent for retirement and 20 percent for short-term financial goals such as buying a car (with cash!) and a house. If you already have a house and car, that 20 percent will pay off the house and allow you more freedom and flexibility for living your dreams in the future.
You are less likely to get back into debt if you follow these steps and truly make an adjustment in your attitude, habits and budget.
After all, wouldn’t you rather be out of debt than have a persistent debt collector such as Derek Smeath from “Confessions of a Shopaholic” stalking you?