Kiss Your Debt Goodbye: Create a Debt Payoff Plan That Won't Make You Scream
Debt. It's the uninvited guest at your financial party, the annoying telemarketer who calls during dinner, the persistent mosquito buzzing in your ear. But what if I told you that paying off debt doesn't have to be a never-ending horror movie?
You can create a debt payoff plan that won't make you want to scream into a pillow (or throw your computer out the window). The key is to find a plan that fits your lifestyle and financial goals, like a comfy pair of pajamas. There's no one-size-fits-all solution, so ditch the "shoulds" and embrace what works for you.
Think of it like choosing a dance partner. You wouldn't pick someone who steps on your toes or has two left feet, right? The same goes for your debt payoff plan. It needs to move with you, not against you.
Here are 6 steps to create a debt payoff plan that works for you:
1.Get Your Financial Basics in Order:
Create a detailed budget. Think of it as your financial GPS, guiding you toward your destination.
Build an emergency fund of at least $1,000. Life loves to throw curveballs, and you must be prepared to hit them out of the park.
Stop using your credit cards. Paying off debt while using credit cards is like trying to run a marathon with a backpack full of rocks.
2.Decide When You Will Start Paying Off Debt:
Ensure you're in a stable financial season, not in the middle of a financial hurricane.
If you are facing a loss of income, focus on savings to protect your essential living expenses.
If you face a significant life event like birth, death, or divorce, focus on savings due to unpredictable costs.
3.List Your Debts:
Include all the juicy details: name, due date, interest rate, total balance, minimum payment, current payment amount, and estimated payoff date.
4.Prioritize Your Debts:
Choose a debt payoff method that aligns with your personality and financial goals. Are you a math whiz? Go for the Debt Avalanche. Need a quick win? The Debt Snowball is your friend.
Consider the following methods:
Debt Snowball: Pay off the lowest balance debt first.
Debt Avalanche: Pay off the debt with the highest interest rate first.
Cash Flow: Pay off the debt with the highest monthly payment and closest payoff date.
Shortest Payoff Debt: Start with the debt that has the least amount of payments remaining.
Most Financially Damaging: Prioritize government debt (taxes) or debts that can lead to wage garnishment or legal trouble.
Emotionally Draining: Start with the debt that causes the most emotional distress.
5.Decide On The Amount Of Extra Debt Payments:
Start with a realistic amount from your budget and gradually increase it. Think of it like training for a marathon; you wouldn't start by sprinting 26 miles.
Consider using your current total minimum payment as a baseline and rolling over paid-off debt payments.
Commit any "windfalls" like tax refunds or bonuses to your debt.
6.Decide What You Will Sacrifice to Become Debt-Free:
Determine your level of intensity and what you're willing to give up temporarily to achieve your debt-free goal. Maybe it's those daily "treats" or that monthly subscription box you never really use.
Consider getting a second job, limiting vacations, or cutting back on non-essential expenses.
To stay motivated, dream, and decide what you will do once you're debt-free. A fancy vacation? A new gadget? The possibilities are endless!
Remember: Paying off debt is a marathon, not a sprint. There will be moments when you want to give up but don't! You're stronger than you think.
Ready to be your own boss?
Develop a strategy using a debt payoff calculator like Vertex Debt Reduction Calculator or CalcXML Debt Payoff Calculator.
If you need more help creating a plan to quit your job and launch a business, consider scheduling a FREE Job Exit call.
