How to Clear Debt – Start Today
Do you need to know how to clear debt? If you’re like most Americans, you have at least one outstanding debt in your name that causes you stress. Wouldn’t it be great if you could create a plan to make that debt go away? Of course! Let’s begin….
Figure out your total debt balance
Before starting any financial wellness journey, you need to know what your total debts are. Add up all of your credit cards, personal loans, car loans, student loans, mortgages, etc. to get a grand total. The number may be expected, or totally surprising (especially if you have never checked before).
Now what? I’ll be candid – this is initially going to be hard.
Here are a few steps you can take today that will make a difference:
- First things first, get real with yourself. Say it out loud: “I have a debt problem and need to fix it.” You have to be mentally prepared. This will not be an easy task to begin and follow through.
- Create a reward system for yourself. This will help with any discouragement along the way. Example: For every credit card you pay off, treat yourself to dinner, a new pair of shoes, or a night out with friends.
- Take ALL of your credit cards out of your wallet. Put them in a safe place. You will enjoy the satisfaction of cutting them up one by one as you start paying them off.
- Create a budget. This is a MUST. There are many free tools out there to make it easy. Make sure to include a “spending money” category. This will be for food, gas, and fun (you are still allowed to have a little fun and buy something for yourself!). Of course, make the “fun” piece a reasonably small amount. 🙂
- Once you know your budget, create a separate checking account for your direct deposit and bill payments only. Setup automatic payments for all bills, so you do not have to think about it. Your other checking should be linked to a debit card. Setup automatic transfers for every payday to transfer your budgeted “spending money” to the debit card account. Only use your debit card for purchases. This way, you stick to your budget, and won’t overspend.
Once these imperative steps are done, you are ready to roll!