Being in debt is one of the major causes for most peoples stress today. It is something that almost everyone has experienced at one time or another in their life.
It can feel very overwhelming, and extremely confusing on what to do when we find ourselves in debt.
No matter how much debt you currently have, this three step process will work. Paying off debt takes consistency and discipline. It is not generally a quick process.
Good things take time, and will require you to make certain sacrifices.
1.) Track Your Purchases
If we want to pay off our debts faster than ever, the first thing we must do is start tracking our purchases.
You need to have a clear understanding of where your money is going each month. The more detail that you can put into this breakdown, the better.
Most people look at their finances at the end of each month and ask themselves the same question over and over again:
“where did all my money go?”
It can feel like we just never have any money. Make sure that you take the time to document where exactly every penny is going.
Yes, every penny.
Track your purchases with great detail for at least one month. It will be a major eye-opener as to where the majority of your money is going.
You will see the areas in your life that are costing you the most money. Once you identify the problem area’s, you can then begin to eliminate or minimize them.
2.) Build A Budget
Now that you have a clear idea of where your money is going each month. You can now start to build yourself a budget.
Most people hear the word budget and think that it means that they only get to eat rice and must live by candlelight. This isn’t the case.
Now, does this mean that you won’t have to make sacrifices? No, there will always be sacrifices that need to be made to pay off debt. But this isn’t the only part to living on a budget.
What living on budget means more than anything is that you have a plan for your money. A budget is like the blueprints to your financial well being. It’s the guideline we must build and follow to reach our goals.
Imagine trying to build a house without blueprints. You would just be cutting random boards and nailing them together aimlessly. Think how long it would take to build a home.
Not to mention what the quality of your home would be. It would be crooked, out of square and well a general mess. The first major storm that rolled through would destroy it.
It’s the exact same thing with having a budget. You need to have a blueprint that you can follow so that it doesn’t take your three times as long to pay off your debts.
Also, having a budget creates stability. You want your finances to be strong so then when a storm rolls through you, nothing is destroyed.
3.) Create a Debt Repayment Plan
Now, circling back to tip #1, this is why it is a must that you track every purchase down to the penny.
You see, an important part of your budget is knowing exactly how much money you can live on until next payday. This is important because you want to maximize the amount of funds that can be put towards your debts and savings every pay check.
The more detailed we were in the beginning, the more exact we can be with our debt repayment plan. You will have a clear idea of the max amount of money you can put towards your debts.
Your debt repayment plan will be custom to your life. And if you want to pay off your debt faster than ever, we must be detailed.
No matter what your debt repayment plan is, the key is to be as consistent as possible. Make a plan and do what ever it takes to stick to that plan with great discipline.
These steps all compliment each other. Just like a tripod, if you take one of these steps away, the system falls.
Discipline and Consistency.
If you can be disciplined and consistent with each of these steps, you too will be on your way to paying off your debts.