When you first decide to get out of debt, it’s common to spend a bunch of time analyzing your debts and trying to figure out the “best” way to pay them off.
Should you pay a little bit extra to each one every month? Should you focus on just one with the debt snowball method? Use a debt avalanche? Reduce your interest rates?
But there are two things that matter a whole lot more that you’ve got to do if you want to get out of debt and stay out. (One’s something critical that so many people forget to even think about, let alone do.) Ready for them?
1. If you want to get out of debt, you have to stop borrowing.
It sounds so simple, doesn’t it? Quit borrowing money, make the payments on the loans you already have, and eventually you WILL get out of debt (so long as you’re at least paying enough to knock out a little bit of the principal too.)
You have to quit borrowing in order for any get out of debt method to work.
Captain Obvious here, right?
Except it’s not. I can’t tell you how often I borrowed on one hand while struggling to pay off debt with the other, never realizing what was actually holding me back. And I was by no means alone. So many people tell me that they had to borrow for emergencies, travel, the holidays, car repairs, you name it.
It’s really common to forget that when you’re in a hole, the first step is to put down the shovel. Stop digging, prevent more earth from falling in on you, and then figure out how to climb out.
How to quit digging yourself in deeper.
It helps to have a support group and clearly defined goals. In other words, you’ve got to know what you want (to be debt free), why you want it (less stress, a better future, [insert your reason here]), and you’ve got to talk to other like-minded people who are going through the same thing.
While you can quit debt cold-turkey and without any outside help (and I highly recommend quitting debt cold turkey!) it helps to know that you’re not crazy.
Talk with others who have done it or have seen successes in their journey so far. It helps to hear “great idea on buying that beater!” instead of “isn’t it time to buy a new car?”. Or “Hey, want to come over for game night?” instead of “Oh come on, let’s go out to eat tonight at that new restaurant!”.
It helps to read stories from others who’ve been there, done that, and then gone on to get the coveted I’m Debt Free t-shirt.
If you’re married or in a relationship where you share money, of course it also helps immensely to be on the same page as each other. It’s hard to get out of debt when you’re frantically trying to climb out of the hole but the other person is pouring dirt in on top of your head.
2. Then, have a backup plan and stick to your guns.
Of course, we all need money for things. That means that we’ve got to have a backup plan so that we can successfully quit borrowing money.
In financial terms, that backup plan is often an emergency fund. (If you don’t yet have one, here’s how to get started. Aim for a thousand dollar emergency fund for starters — or whatever you think you can scrape together. Any emergency fund is better than nothing.)
Making sure you have money available when you need it also means budgeting. Start planning ahead now for all of the types of expenses you’ll encounter: regular, irregular, and even the unexpected. (You may not know WHAT unexpected expenses will come up, but you can be sure something will. Start expecting the unexpected.)
The most important thing when it comes to quitting debt is remembering that there are always alternatives. It’s just up to you to find them. That gets easier with time, and with smaller successes. Stick to your guns on this most important step, and you absolutely will get out of debt.