In my practice I’ve helped many people pay off all their debt. With borrowed money being so cheap right now everyone seems to be borrowing more and more of it. It is also the single reason for people to lose sleep at night. When I’m doing book signings I get most of my questions around debt and how to get rid of it.
My blog this week is (what I tell everyone when they ask) what I talk about in my book. Debt is that weight that keeps you from soaring with your money. Once it is released you can truly take off. So let this be the day you draw a line in the sand and free yourself from bad debt. Here is my action plan:
1. SAVE before you pay back. This sounds counter intuitive but it works. Save up $1,500 or $1,000 in your chequing account as a buffer. If you pay chequing account fees, save enough to get these waived. I have $1,500 in my chequing account at all times and it saves me $8.50 x 12 = $102. On $1,500 that is a 6.8% return on my money. Better than the average savings account. If you don’t pay a bank account fee keep it in a savings account. It will act as a buffer so if you’re short of money due to emergencies, you won’t go further into debt. Keep it there no matter what.
2. ISOLATE your debt. Try to get all of your debt on a low interest credit card or even better a personal loan. Get the rate as low as possible and fix the payments. If you owe $20,000 commit to paying $600 a month or whatever you can afford and wipe it out in three years.
3. PAY off something pronto. Get the lowest balance card and pay it off right away – even if it’s $50. Then celebrate the victory! That was you first move towards being debt free and you want to associate it with something positive. Just don’t celebrate on your credit!
4. MARK the day you’ll be debt free. Write it on every calendar in the house, at work, and on your SmartPhone. Once the debt is gone take the next payment that would have gone towards the debt and reward yourself with it. Maybe a nice dinner, savings towards a trip, a nice new debt free pair of shoes. Know that when you have hit your debt free day there will be a cash reward for you.
5. LOSE the guilt. I see so many people feel bad about their debt and it doesn’t serve them well. Use cash for spending, set up a budget, only use cards for fixed monthly expenses and have it automatically pay off each month. Set a plan and then know what you’re a new money maverick/maven and don’t let old habits hinder your new positive ones.
Blow out your debt and start sleeping again,
Dave
