How to stop drowning in personal debt.

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When your finances seem to be heading down the wrong path and your debt is getting out of control, be wise and take stock of the direction you are going in. There are steps you can take to prevent you from getting into further debt and to help you eliminate some of what you are currently dealing with. Use these tips to help you begin moving in the right direction financially, they really helped me.

Put Your Credit Card in a Drawer at Home

If you have a difficult time saying no to purchases, I know I do, take your credit card out of your wallet and put it into a safe place at home. Before micro-chip cards, I used to put mine in a bowl of water in the freezer… Wherever you put yours, make the decision that you will leave it there and will only take it out when absolutely necessary. This alone will help force you to be more cautious in your spending.

Cancel Any Retail Credit Cards

Retails credit cards typically have a high-interest rate. They also make it that much easier to spend on because “It isn’t a Visa, right?” and even easier to spend on when you feel like you have several options as to where the money will come from. Get rid of these cards and keep only one main credit card, which is hopefully the one you have taken from your wallet and placed in a safe place at home.

Creatively Find as Many Ways to Save as Possible

Look for every way possible to save money. Whether that is by clipping coupons or shopping only during sales, you can make it work. There are other ways to save in other areas, such as your electricity bill. Be vigilant about turning lights off when you leave the room, unplug appliances that are not in use, hang dry your laundry, put on slippers instead of cranking the heat.

Stop ordering in and no more Timmies! If you must, buy a Timmie’s tin and make a coffee at home before you leave for work. Also, wait 24 hours prior to any purchase, because you may not need it tomorrow.

Financial Peace

And, finally:

Pay Back Your Debt with Dave Ramsey’s Snowball Method

List your debts smallest to largest with the payment information next to them. Make your minimum payments on ALL of your debts, except for the smallest one. On this, you will be paying the minimum PLUS extra money every month.

Once the smallest debt is paid off, you roll over the payment you were making on that debt as the added money towards the next smallest debt. This continues until you are debt free!

For example, let’s say you have three debts to pay. Your car loan, Visa and your Walmart Store card as charted below.

Debtor
Visa:
Car Loan:
Walmart Card:

 Amount Owed
$500.00 + 13% interest
$1000.00 + 4% interest
$2000.00 + 19% interest

Min Payment
$15.00
$25.00
$50.00

Every month you have to pay out a total of $90.00 but will need to pay more to get out of debt. So you are going to pay an additional $100, on top of the minimum payment, to put toward your principal debt. This will be a total of $190 per month.

What most people do is breakdown that additional $100 into 3 payments of $33 per debt, which is why we feel like we are always paying and not seeing a light at the end of the tunnel. Because for the next 18 months you know you have three debtors watching over your shoulder.

Using the snowball method it looks like this.

Visa: minimum + max principal payment = $115/month
After 4 months, this debt is gone and not weighing on you.
Car Loan: minimum = $25/month, for 4 months.
Walmart Card: minimum = $50/month, for 4 months.

On the 5th month your payment plan will now look like this:
Carloan: minimum + previous Visa payment= $140/month
After 8 months, this debt is gone and not weighing on you.
Walmart Card: minimum = $50/month, for 7 months.

Finally, on month 8, your payment plan will look like this:
Walmart Card: minimum + previous Car loan payment= $190/month,
10 months from here you are TOTALLY debt free!

With the snowball method, you are paying all the same amounts, only everything is paid off one by one. They are paid off faster individually, saving you a LOT of interest. You can find a break-down of the snowball method on Dave Ramsey’s blog, it is worth the read!

Learning to be smarter with money is not easy, but gets easier as time goes on. It might seem like a chore at first, but the benefits outweigh the anxiety. You will become a more creative person and save your hard-earned money and start to see that living debt free is possible. What better benefits could there possibly be than that?

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