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This post was updated on May 17, 2018.
Raise your hand if you’ve heard this before: “Debt is always going to be a part of life and that is OK.” Sure, you can find ways to pay off debt little by little, but in the grand scheme things, does it really matter that you put a lot of effort to it if it’s always going to be there?
Are you someone that believes this to be true?
When considering how expensive some things are (cars, houses, school, etc) it is totally understandable to believe that we will forever owe payments in order to have any of these things.
But is there another way?
The more I study and write about finances, the more I believe we have been duped. We have been told over and over again that we just need to accept that we will have to incur debt in order to have certain things; it’s just a part of life.
And I am here to ask the question: why?
Why do we have to accept that we will always have debt and be OK with it? Because the truth is that I am not OK with it. I don’t want to be a slave to lenders for the rest of my life. In fact, I am currently a slave to various lenders and working my way out of it – hopefully for good!
Think about that whenever you owe money, whether it’s to a car dealership, a bank, or a credit card company, you are tying up some of your resources every month. These are resources you could be saving, investing, or giving to those less fortunate. Heck, they could be resources you use to go on a vacation debt-free!
Not only are your resources tied up, but you’re losing even more of your money in interest. I am currently trying to pay off my credit cards for good and every month I add up the interest I incur. Only recently have I been doing this and it makes me cringe to think about how much of my money lenders are getting. I could be doing so much more with that money!
I have that debt because I bought into the myth that it was necessary. But not anymore!
Read on for tips on how to pay off your debt and stay that way – but be warned, it will likely take hard work and discipline.
#1 Create a budget
I know – I used the dreaded “B” word. But budgeting is so important to paying off your debt and living a debt-free life. It helps to keep track of finances and to know exactly how much money you have to spend and where it is going.
Too many of us blindly spend money without really keeping track of how much is going out of our pockets. Once I started budgeting and telling every single penny where to go, everything changed! I started to realize just how much money I was wasting on things I didn’t really need. Plus, once I learned how to budget, setting one up really isn’t so bad!
Related: Create A Budget In 5 Easy Steps
#2 Have an emergency fund
An emergency fund is not a credit card. It is not a personal line of credit at the bank. It is not a HELOC.
An emergency fund is cold, hard cash ready for you to use.
One option is to open a savings account at a bank just for your emergency fund so it is readily available in case you suddenly need it.
Having cash easily accessible is important because it means you will be able to pay it back interest-free unlike any lines of credit. When you are able to do that, the sooner you will pay off your debt and the better chance you have of living debt-free forever.
Just be sure you are using it on an actual emergency, which is a situation you never saw coming that you must take care of right away such as:
- Your car breaks down
- Your roof has a leak
- Your husband has unexpected surgery
What is not an emergency?
- A last minute vacation
- Needing to get the newest version of your phone that was just released
- Upgrading your car
If you’re unsure of what constitutes as an actual emergency, ask yourself if what you’re spending money on is something you absolutely have to have or take care of now or if it’s more of something you want but can live without.
I love to use Dave Ramsey’s EveryDollar App to create and track my budget.
Other than just saving for an emergency fund, save for other things you know you’ll want – long before you even want it! A vacation, a new car, new furniture, etc. Start saving and have the cash available for when you are ready to buy.
Also, creatively look for ways to save in certain areas: shop sales at the grocery store, buy in bulk when you can, eat out as little as possible.
When it comes to college, go to Community College before paying for an expensive school for all 4 years.
We all know that too many of us spend years trying to pay off debt that amounted during college.
And to lead into my next point, save money by not having to have a car that is perfectly new and shiny.
#4 Stop using credit cards
I am not completely anti-credit cards. However, most people don’t (can’t) handle credit cards appropriately. Instead of using them to help build up credit and paying them off every month, they are often used to pay for things when the money isn’t there (myself included!).
As previously mentioned, my husband and I have gotten into this trap and now we are desperately trying to get out of it. I can see how much of my money goes toward interest every month and it makes me sick. That money should be going into my pocket instead of the credit card companies!
If you are someone that thinks you can handle using credit cards appropriately, then I caution you to be careful. I was that way as well and then eventually got into trouble.
Dave Ramsey recommends using cash for all purchases. Cash is a lot more difficult to spend (it takes a lot more effort to hand over cash than it does a credit card) and when you use all the cash in your budget for that month – you stop spending! I strongly urge you use this method to pay off your debt and keep it away.
Here are some very cute and fun cash envelopes I found!
#5 Be content with not always having the “latest and greatest”
Many people I talk to think there is no way they are ever not going to have a car payment because they could never see them self driving a car that isn’t brand new (or newish). For whatever reason, many of us have this mindset that as soon as a car is a few years old, it’s time to upgrade to a new one. Because of this, a car payment is a debt that is being paid off for most of our lives.
But is it really true that we so often need a new car? Are the only cars worth driving a few years old or newer? Would it really be the end of the world to drive a car that may have a little bit of rust and a few dents and bruises?
A couple of years ago, my husband and I went to buy a new car because we thought the Jeep we had wasn’t worth the $1,000 it was going to cost to fix. Thank goodness my father-in-law knocked some sense into us! Regardless of whether or not the Jeep was “worth” the $1,000 to put into it, we would far surpass the $1,000 in car payments on a new car in only a few months. And now, instead of still having a monthly car payment, we are still driving that Jeep only $1,000 poorer.
Unless I am having to put hundreds of dollars into a car every month to keep it going, it’s worth it to me to drive it into the ground.
Other popular items I think we spend money on when we still have perfectly good working ones already are clothes, cell phones, and many other new electronics that come out.
#6 Earn more income
It goes without saving that earning more income could be very helpful to paying off debt and keeping away from it, as long as you’re being wise with that extra money!
This doesn’t necessarily mean you have to get another job. It could mean selling items you no longer use, doing a side project or two, or selling a craft on Etsy.
Another possible way to earn extra money is through starting a blog. Nataly with Love and Paper Flowers has a great ebook called Blocabulary Plus, which is everything you need to know about starting a blog. You can check it out here.
Our society tells us that we always need to have the latest and greatest, but what we actually need to do is determine whether the correct word is “need” or “want.”
I don’t believe that we have to buy into the myth that we will always have debt. Although it may take a while to pay it down, especially when considering large debts such as student loans and a mortgage, I believe it is possible. But it takes hard work and an unwavering belief that we truly are better when we are debt-free!
Are you currently debt-free? What kinds of steps do you take to stay that way? Or if you are currently working to pay off debt, how is it going for you?
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