In the Red

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Debt is everywhere in our culture.

You can’t go online, shop at the mall, or walk down the street without being bombarded by all kinds of marketing messages encouraging you to embrace debt.

They say debt is normal. They say you can’t be a student without a loan. They say car payments are just a way of life. They say you can’t breathe air without a credit score.

College students are now graduating with more than $30,000 in debt on average. Seventy percent of American families live paycheck to paycheck.

We’ve got it all wrong!

Living in debt is a horrible way to live. If you’ve lived in debt long enough to get a bill or two, you know that.

So what do you do when you finally get sick of the stress and decide to dump debt once and for all?

Start with the debt snowball. Here’s how it works:

List the balances on all your debts from smallest to largest. Make the minimum payments on each debt except for the smallest one.

Attack that smallest debt with every extra dollar you have. Sell stuff on Craigslist. Cut back your spending. Do everything you can to pay off that smallest debt as quickly as possible.

Once you’ve knocked it out of the way, focus on the next-smallest debt. This time, take everything you were putting toward the smallest debt and add it to the minimum of the second-smallest debt. Rinse and repeat until you are completely debt-free!

You might hear some people say to pay off debts with the highest interest rates first, but I want you to have some quick wins. When you’re getting out of debt, you need some confidence and some quick reminders of why you’re sacrificing so much.

If your largest debt has the highest interest rate, you could be paying that one debt off for years. So why not go ahead and get those little nagging debts out of the way first?

Remember, getting out of debt isn’t always an issue of math. It’s more about changing your behavior. If it was about math, you never would have gotten into debt in the first place!

You have to learn to say no, make sacrifices and re-examine your priorities. It’s nearly impossible to get out of debt without changing the way you think about money. Even if you did pay off what you owe, you find yourself right back in debt if your spending habits never change.

When you reach your goal of being debt-free, stay debt free!

Keep doing the things you were doing to get out of debt like budgeting and staying away from credit cards. Stop caring about what your friends think, because the moment you decide to get out of debt, you’ll start hearing their opinions.

Make a plan for your money and stick to it. This includes setting aside an emergency fund, saving for college and retirement, paying off the mortgage as fast as possible, and, most importantly, giving a whole lot of money away.

Bottom line: The whole point of getting out of debt, saving and creating a financially healthy life is to leave a legacy. In other words, you do all of this so you can help others and set future generations of your family up for success. That’s what it’s all about.

Keep that in mind if your debt-free journey is just beginning—or if you’re still not sure living without debt is that big of a deal. What could you do with all the money you send out to others every month? How could you make an impact in your life or in the lives of others if all of that money stayed in your pocket?

If you’re struggling with debt, my hope for you is that you’ll realize there’s another way. Make a plan, dump debt and find out what it means to live debt free! 

As a #1 New York Times best-selling author and seasoned communicator, Rachel Cruze helps Americans learn the proper ways to handle money and stay out of debt. She’s authored two best-selling books: Love Your Life, Not Theirs and Smart Money Smart Kids, which she co-wrote with her father, Dave Ramsey. You can follow Cruze on Twitter and Instagram at @RachelCruze and online at rachelcruze.com, youtube.com/rachelcruze or facebook.com/rachelramseycruze.

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