This is the first of three articles on getting out of debt:
Serious question. How much debt are you in?
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I don’t want to know the answer, but you should be aware. Write it down on a piece of paper and take a minute to soak it all in.
Do you want to see that number disappear for good? What if I told you, with enough hard work and dedication you could see that number reach zero.
I don’t care if you are $10 in debt or $100,000. It’s time to get serious about your situation.
I once sat in a classroom of people looking to figure out their debt situation. The combined debt of the class was mindblowing and frankly, a bit scary.
The course lasted for about thirteen weeks, and by the end of it, most people had made significant debt repayment, and everyone had a better outlook on their debt.
Today’s blog post is about getting your finances in order and saying no to debt for good! If you find yourself in debt, there are two things you can do for yourself:
- Evaluate your spending habits and make as many cuts as necessary.
- Increase your income.
Let’s start by taking a look at your spending habits.
Create a Budget
I’m with you. I love ordering pizza on a Friday night. But do you want to know what’s even better than pizza? Having money left over at the end of the month!
Tracking your spending isn’t fun, but it’s a necessary skill if you want to get out of debt. If you don’t already have a budget, then it’s time to start!
A healthy budget allows you to track every single penny that enters and leaves your bank account. So what does your budget look like?
Your budget needs to be broken down into different categories or expenses. Let’s say, for simplicity sake, the only things you had to worry about each month was rent, retirement savings, and groceries.
Let’s also say you make $1,000 each month. Rent is usually a fixed expense, let’s say yours is $600. My budget would say each month $600 is going towards rent, my food costs are about $300, and that would leave me with $100 for retirement each month.
Notice how the budget balances out? Your income of $1,000 is already allocated before the month begins. There is no extra money left over at the end of the month because it’s already decided on where it will be spent.
Now let’s say you don’t eat as much and your food expenses in January is $280. You were under your budget by $20 (yay!) That $20 now carries over to the next month, so you start February with $320.
Budgeting is the first key to success! Luckily we have done most of the hard work for you, and you can get our free budget spreadsheet here.
Cut Unnecessary Expenses
I swear, deep down inside of me is a little kid that just wants to have fun and spend money. Unfortunately when you are trying to get out of debt, you must put that inner child in time out!
I would absolutely love going to taco bell every day for lunch, but the reality is that I can’t afford it. We have these bad financial habits that cost us money each day and they are different for each person.
There isn’t anyone to tell me I can’t go to taco bell, except my wife because she’s the boss. I need to be responsible enough to say when I can and can’t go.
How do I know when I can get my favorite cheesy burritos? When I look at my budget and I have enough money set aside for it.
Now if you are trying to get out of debt, consider cutting the unnecessary expenses like going out to eat. The more you can save by sacrificing excessive spending habits, the faster you’ll get out of debt.
I would highly recommend setting aside a little money for yourself to spend on whatever you want. You can’t close your wallet tighter than Fort Knox and expect to keep your sanity. You need a little fun in your life but not too much!
One of the biggest challenges people face when getting out of debt is their social circles. You might have gotten yourself into debt because you partied with your bro’s every Friday night. Now you’re trying to get out of debt, but your friends are still going to want you to tag along and encourage bad spending habits.
What’s in Your Pantry?
One of the easiest and yet hardest places to cut expenses is through the food you buy. Be careful though, have you ever tried to take food away from your wife? Don’t take food away from your wife.
Food is a weakness for way too many people and I don’t blame you. If I were a billionaire, I would have a pantry stocked with all my favorite foods because who doesn’t love fantastic food?
The problem is we spend way too much on food. Take a serious look at what you are buying each month and start cutting food costs.
Eating out is way too expensive. Do you know how much money you spend each month on restaurants and fast food? Learning to cook healthy and inexpensively is a skill worth the time to learn.Sharing is CaringClick To Tweet
Your housing situation is one of the most expensive decisions you can make. How much money do you make each month and how much of that is going towards your rent or mortgage payment?
I remember the first time I left my parent’s house, the majority of my paycheck was going towards my monthly rent! Luckily, once I got a better paying job I was able to get my house, and the monthly mortgage payment wasn’t that much more.
Personally, I like home ownership because one day the house will be paid off and I won’t be paying rent anymore! Yes, there are pro’s and cons, such as being on the hook for anything that breaks but that’s nothing an awesome budget can’t handle.
Consider the area you live in and do some research on the cost of living around your location. If you’re renting, are you paying an extremely high rent?
Sometimes it’s better to move cities instead. The cost of living in a big city like New York is extreme compared to smaller cities. Living in a big city can make it difficult to get ahead, but some people don’t want to give up the lifestyle which is understandable.
What are you Driving?
Car salesmen are amazing at getting inside your head, convincing you to make an emotional decision. You remember heading to the car lot just to look?
Your car was sitting there with glossy black tires, the perfect color shining in the warm summer sun. The salesmen came up to you with a friendly smile and talked about why it was the best car on the lot.
You were convinced to go for a test drive, and the new car smell sent a rush of dopamine through your mind. This car had to be yours, and before you knew it, it was.
Now that you have your new dream car, you’re sitting on a pile of debt that you really didn’t need. The car is depreciating from the minute you drove off the lot, and now you’re stuck with a car that isn’t worth what you paid for it.
Everyone’s situation is different, but you might see about trading your new expensive car in for a cheaper pre-owned car. The sooner the better, because the more you drive it, the more your car is going to lose value.
Let’s continue to the next article: Get out of Debt, Grow your Income!