The following post is from Christina of Northern Cheapskate:
The best financial decision you can make is to never get into any debt.
If you’re like the majority of Americans, you’ve already botched that one. But you can do the next best thing:
Get out of debt now and stay out.
But how do you dig out of debt when the hole seems so deep? Start with these steps:
Assess the situation.
Sit down with all of your bills and statements and figure out exactly how much money you owe, who you owe, and how much interest you’re paying on each debt. As painful as this step can be, it’s critical for establishing a plan to get rid of your debt. Determine what you will have to do to get out of debt.
You should also do some soul searching to determine what lead to your debt problem. Too much house? Expensive cars? Bought lots of gadgets? Took a lot of vacations? Consider the emotions behind your spending decisions. Most people who are in debt have something else going on in their lives and use spending as a way to cope with that turmoil. Figure out what motivated you to spend beyond your means, and work on developing a new way to deal with those issues.
Stop spending money you don’t have.
It sounds so simple, but once you’ve got into the habit of using plastic or taking out loans, it can be a hard habit to break. Refuse to take on any more debt. Use cash for everything. Start stretching your budget by cooking at home, taking care of what you already have, and shopping secondhand stores and sales. Take advantage of all the free resources in your community and focus on free experiences instead of stuff.
Find money to throw at your debt. Sell some of your stuff, downsize to a smaller home, raise your insurance deductibles, or get a second job. Do whatever you can to bring in some extra money and apply it to your debt. Every little bit counts, so be sure to look for ways to save on both big things and the little things.
Establish a support system.
Get your entire family on board with your plans to get out of debt. Find friends and community members who are also working to become debt-free, and be sure to spend time with them. You won’t have to worry about “keeping up with the Jones” when you are all on a tight budget. You’ll find inspiration and support from those who share your journey. Read frugal living books and visit frugal living websites and online forums to find additional information and support to help you break the cycle of debt.
Stick with it.
It is really hard to get rid of debt. My husband and I slogged through $70,000 of student loans and car debt for seven years on mediocre salaries while we paid down our debt. It was hard to watch our friends take vacations and buy the latest gadgets while we ate dinner at home and watched movies we borrowed from the library. Becoming debt free (except for our mortgage) has been worth all the work. We now live in our dream home in the country, and I’m able to stay home with our kids.
I’ve learned that you can wallow in self pity, and denial and bad financial habits, or you can choose to change your life for the better.
No matter how hard it seems, stick with it. You’ll find more freedom – both financially and emotionally – then you ever dreamed possible when you are free from the shackles of debt.
Are you working to dig out of debt? How do you stay motivated?
|Christina Brown is the creator of Northern Cheapskate, a blog dedicated to frugal living through coupons, freebies, and money-saving ideas. She lives in the rural north woods of Minnesota where she clips coupons, pinches pennies, and chases her three boys (a 6-year-old and twin 4-year olds) as a stay-at-home mom.|