Have you ever just woken up one day and realized that something needed to change?
Shortly after I started dating my husband, I knew we were going to get married, and that got me thinking about my financial situation. I was in debt, and I did not want to bring that to our marriage or saddle my husband with debt that was all my fault.
So, one day I decided I was going to change, bought Dave Ramsey's book The Total Money Makeover, got myself on track, and didn't look back. I paid off $12,000 of credit card and auto debt in 10 months, making less than $32,000 a year in a very high cost of living area.
Here's how I did it:
Be Ready to Change
This is the first step in preparing to pay off debt, because it is really hard when you sit and think about what paying off debt will mean. No more random meals out. No more using your credit card. No more spending money freely and without checking your budget. Everything has to change if you want this to happen. You will not be able to keep doing what you've done and get the same results. It will be very, VERY hard, but you can do it! Honestly, once you get going, the progress you make is addicting and it really does beat spending money. You just end up not wanting to hurt your "debt snowball" money.
Create Your First Budget. Now.
It doesn't matter what tool you use, but you absolutely MUST create a budget immediately, if you want to make any progress at all. Whatever way you do it, just do it! Give every dollar a name. That is, figure out your monthly income, what you spend your money on, and allocate that many dollars to a category.
For example, I had categories for things like rent, groceries, toiletries, cell phone bill, utilities, and my minimum debt payments. Once I had my categories with monies allocated, I took stock of what was leftover from my paycheck, and the ENTIRE AMOUNT went to debt repayment. That was the fun part!
Get Familiar With The Debt Snowball
The idea here is that you pay off your smallest balance debt first, not your highest APR. Although that may be the financially correct method, the debt snowball relies on momentum and quick wins.
I know the math says to pay off the debt with the highest APR, but the mental boost I got when I paid off that first small debt was INCREDIBLE. I was so motivated to pay every single bit of money to my debt. Plus, once I paid off the smallest, I then freed up that monthly payment to go towards the next largest debt. The snowball method works!
Do Whatever It Takes
Have a yard sale, sell things on Craigslist or Ebay, or even hold a bake sale or work a second job for a short time. You can also tighten up your budget by cutting cable (this is a habit that has lasted for me... I haven't had cable in years! Netflix does the trick!) and especially try lowering your cell phone and internet bills. Call your utilities and ask about specials for lowering your plans. I called and simply asked for a lower price for my internet, and they gave me $10 off a month just for asking. It doesn't sound like a lot, but when you make these kinds of small changes over many different categories, its easy to send an extra few hundred dollars to your debt each month!
Stop Using Your Credit Cards!
One of the very hardest things for me to do while paying off my debts was to use cash for everything. Not even a debit card. It is mentally much harder to part with physical cash when paying for something than it is to just swipe your card. When I really got serious about paying off my debt, I switched everything over to cash payments (except online utility payments) and it worked so much better for me. When the cash was gone, it was gone, and there was nothing I could do about it but wait until next month.
Get In Touch With Your Inner Budgeting Nerd
There are usually two kinds of people in a relationship, money wise -- the free spirits and the nerds. I am most certainly a free spirit when it comes to money. I don't feel the need to check my spending, make a budget, or anything like that. It's not that I don't think they are great and necessary things, it's just not my nature to be so detailed about it. This is what got me into trouble in the first place.
When you are paying off debt, you need to get in touch with your budget nerd side. And when you're in the thick of it, you really will! I checked my budget multiple times a day, made spreadsheets projecting when I'd pay off each debt, and was constantly on the search for extra money to throw at my debt. It was really fun at the time, and I embraced it.
Then, after I got married, my husband and I combined our budgets, and I let him take it from there, because he is the budgeting nerd. We have "budget meetings" twice a month, where we go over our spending to make sure we are staying on track, keeping up with our savings goals, and planning out the next month. It works very well, because it allows both of us to be in our natural states.
I know you can do this!
You can do it; you can change your whole life with a little hard work. Dave calls it "living like no one else so you can live like no one else."
Take that first step and don't look back!