In Debt And Want To Get Out? How To Make A Plan
DEBT. "The four letter word" of finances. It's easy to get into, hard to get out of. Whether or not you find yourself on the winding road of debt, you probably know somebody going down that road. So how do you get out of debt? That is the (insert amount of money you are in debt) question. The first step is always acknowledgement. Do not live in denial to your debt. The second step is to make a plan. Dave Ramsey is a man with a plan. He is an American businessman, author, radio host, television personality, and motivational speaker whose vision is to provide resources to enable parents, teachers, churches to educate about finances--budgeting, getting out of debt--to live in financial peace and ultimately create a legacy. Check out his website and get connected to find more resources wherever you are on your financial journey. The third step is stick with the plan and don't give up. You can live debt-free, with determination and by being intentional, it is possible. Even if you get sidetracked, remain hopeful, positive, and focused on the goal--creating legacy.
So how do we make a plan to get out of debt? According to Dave Ramsey, there are 7 Baby Steps you can take. Those steps include (click on each step for more information):
- Baby Step 1: Save $1,000 cash (or the equivalent in your currency) in a beginner emergency fund.
- Baby Step 2: Use the debt snowball to pay off all your debt except the house.
- Baby Step 3: A fully funded emergency fund of 3 to 6 months of expenses.
- Baby Step 4: Invest 15% of your household income into retirement.
- Baby Step 5: Start saving for college (If this applies).
- Baby Step 6: Pay off your home early.
- Baby Step 7: Build wealth and give generously.
Are you still looking for more creative ways to get out of debt? There are 13 ideas for how to cut costs on a daily basis, 8 more basic ideas from Dave Ramsey, then 4 more creative ideas. With a total of 25 ways to get out of debt:
1. Use Coupons. You can just by showing a coupon to the cashier. Just be sure you’re using coupons for products you already buy, otherwise you could end up overspending on items you’ll never use.
2. Try consignment shopping. Kids grow out of clothes so fast! It’s not worth it to go into debt for your kid's wardrobe. Check out local consignment stores that sell pre-loved, good condition clothing. Or you can try online sites or FaceBook groups focused on selling secondhand items. Sites like thredUP and Swap.com (in the US) are great resources to get adult and children’s clothing at a fraction of the cost.
3. Cut cable. Nowadays you can watch most of your favorite shows online. Put the money from the cable bill toward your debt each month and watch how quickly your debt snowball moves.
4. Stop eating out. For a creative way to still socialize and share a meal, have friends over for a shared meal instead of meeting up at a restaurant.
5. Cut out coffee shop visits. Brewing your own coffee at home is a simple way to save money fast.
6. Visit the library. Remember libraries? They have plenty of books and DVDs you can borrow for free!
7. Make a grocery list. Stick to it! Use a calculator while you shop to make sure you’re sticking to your budget. Or you can try ordering your groceries online and then pick them up curbside at the store. Remember, don’t shop on an empty stomach!
8. Learn to say, “No.” Embrace it. Because when it comes to spending money, you’ll be saying it quite often.
9. Tell the kids you’re on a budget. Be open with them about what you do and don’t have room for in the budget. And remember: Don't afraid to say “no.”
10. Avoid expensive hobbies. There are plenty of free activities to do and see, go explore!
11. Cut out membership costs. This includes the gym. You can work out outside—for free. Find an app for strength training.
12. Sell items on Facebook Marketplace or Craigslist. One person’s trash is another person’s treasure. Find items that are just taking up space and make some cash on them.
13. Start a side business. Starting your own business has never been easier! Do you enjoy making things? Sell your product online! Animal lover? Take up dog walking or pet sitting. Have a good eye and a nice camera? Start taking on clients for photo sessions. Christy Wright’s Business Boutique is a great resource to walk you through the process!
The Dave Ramsey Basics
14. Sell your car. The average car payment is more than $400 per month. Just think how much faster your debt snowball could move if you applied that $400 to it each month?
15. Cut up your credit cards. Get rid of them! You’ll never get out of debt until you stop making debt a way of life.
16. Use the envelope system. When you pay with cash, you actually have to feel your money leaving your hands. Ouch! And people tend to spend less when paying with cash.
17. Stop investing. This even means to stop contributing to your 401(k) or retirement. Right now, you want all your income going toward getting out of debt. Once you’re debt-free and have saved three to six months of expenses in an emergency fund, then you can resume your contributions.
18. Use your tax refund to pay debt. Resist the urge to use tax refunds for "fun" until you are out of debt.
19. Stop comparing. Remember, you’re living like no one else now, so that later you can live like no one else! In 20 years, you won’t have a financial worry in the world while they’ll still have car loans, mortgages and credit card bills.
20. Make a budget. Budgeting should be easy and even fun! Focus your money on what matters: day-to-day spending, cutting out debts, and building wealth.
21. Listen to . Every day, Dave helps millions of people across the country find hope and make a plan for their money. Listening to the show will encourage you to stick with it!
More Creative Ideas
22. Give more. Give more? Yes! Giving changes your spirit. Make giving a priority in your budget and you’ll see a difference.
23. Ask for a raise. Why not? You miss 100% of the shots you don’t take.
24. Get a part-time job. Why not become a driver for Lyft or Uber? Or take on a pizza delivery job? You can even deliver other types of food in your spare time by working for places like uberEATS or Grubhub.
25. Stay away from get-rich-quick schemes. If it seems like a pyramid scheme, then it probably is.
According to Dave Ramsey, you can take control of your money, you just need the right plan. Are you in control of your money, or does money control you? In your everyday living, think long-term regarding finances. What financial legacy are you passing on to your children? What kind of legacy are you creating today that will continue for generations to come?
I think the issue of living debt-free is very important, hard to discuss, but perhaps all the more reason to discuss it. To be transparent regarding finances in our family, the only debt we have is the mortgage on our condo. And even with that, our goal is to be free of it sooner than later. In our family, we try to practice most of Dave Ramsey's suggestions for cutting out extra costs, they are wise practices to do, even if you are not in debt. My husband and I both love finding a good deal, and have purchased most everything for our home either secondhand or on sale. (There are a few things, like rugs, bedding, kitchen items, etc... which are better bought new). At this time in our lives, we don't leisurely shop the 'new arrival' clothing section, or scan the IKEA catalogue for the newest furniture... and I'm not sure if we ever will, simply because we like deals, and we like recycling the old to make something new. Less waste. Less consumption. What I DO find challenging is budgeting meals and sticking to that list in grocery shopping. I need to start with weekly meal planning, purchasing food online, and then stick to what I need.
To live in financial freedom, you first need to take the steps to get out of debt. What is your plan? If this seems a bit overwhelming to you, why not start by taking a course or simply start with a free budget app offered by Dave Ramsey. Also, make yourself accountable to another person. Find someone who you is smart with finances and can coach you. When you start on the road to a difficult journey, the most important thing is to go in the right direction! Make sure you have the right compass guiding you.