By Bigg Success Staff
Bigg Success with Money
It’s funny how many people loathe the thought of renting because “it’s just throwing money away”. Yet those same people think nothing of paying hundreds or thousands of dollars in interest on debt (i.e. “rent” money). Debt costs you money that could be spent elsewhere for something more important or more fun.
Too much debt can also cost you time – juggling bills, answering collection calls, and the like. But there’s still a higher price for excessive debt. It creates stress and worry. Your health may suffer as well.
So getting out of debt is a worthy goal. Here are five steps to do it:
Step 1: Stop adding to it
As long as you’re adding to your debt, you’ll never be financially free. So make a point to pay for everything you buy. If you can’t pay for it when you buy it, don’t buy it.
Step 2: Find a reserve
Now, you just have to go one step further and things can really start going your way. Spend a little bit less than you make every month. We have a great thought-starter on how to do it called 860 63 Moves to Stop Living Paycheck to Paycheck].
This little bit of money is like a tiny snowball at the top of the hill. It will start rolling down the hill and get bigger and bigger. That is, this little bit of money you’re saving each month is going to set you free from the burdens of living with a lot of debt.
Step 3: Pick either your highest cost or your lowest balance liability
Next, look at what you owe. Pick either the debt that’s costing you the most money (i.e. the debt with the highest interest rate) or the outstanding account you have with the smallest balance.
The first one (the highest interest rate) is the best move for you financially, as long as you follow through on your plan to pay off your debt. But the second one may work better for you because it delivers the quickest psychological rewards, so you’re more likely to stick with your plan. The key thing is to pick a strategy and go for it.
Step 4: Use your reserve
Now you’re going to take that reserve from Step 2 and apply it to the account you picked in Step 3, along with your regular payment. Keep going until that account is paid off. The snowball is starting to get bigger now!
Step 5: Double down and repeat
You’ve paid off one account. Now take all the money you were paying on that account, including the reserve from Step 2, and apply it to the regular payment on another account. Keep doing this until you’ve got all your debt paid off!