Live Debt Free

I am no fan of debt, I have written about how and why debt can bury you, if you let it, in this blog post. But learning to Live Debt Free is not easy, nor does it get any easier over time. It will take work to become debt free and you have to constantly work at staying debt free. But it can be done and you can do it! I want you to imagine though, for a moment, that you no longer have to sweat about checks clearing or how you are going to purchase food.  Now let’s get that monkey off your back!

Positive Cash Flow

The first thing you need to do to get out of debt is to establish positive cash flow. You must spend less every month than you make, put simply, to live below your means. Establishing personal positive cash flow allows you to put more money towards the debt that you have. You can create a positive cash flow by increasing the amount of money that you bring in or decreasing the amount of money that you have to pay out every month. Or you can do my favorite, both! To increase your money coming in, you may have to pick up an extra job. What may seem like only $55 dollars a week is actually $2860 a year! Not too shabby. The opposite side of that is decreasing your expenses. Which leads me to my next point….

If It Can Be Measured, It Can Be Improved

I don’t know who said that, but it is 100% accurate. If you want to live debt free and cut your expenses you must track where your money goes. Be sure to keep all your receipts, track every penny and you will start to see where you can cut expenses. Most people eat out way too much and it really adds up over the course of the month. If you spend $8.50 a day on lunch during the business week, you are spending $170 dollars on food that you could have brought from home. I personally eat PB & J for lunch every day with chips and water. I spend about $0.50 on my PB & J every day, which sure beats $8.50 for lunch. Track every penny and you will be able to find areas where you can cut out expenses. If you don’t know where to start I recommend a personal financial planner like this one from Amazon.

Decide what debt to tackle First

Once you have increased your cash flow and created positive cash flow, its time to decide where to apply your extra money. As I stated in my blog its all about percentages. Decide which loan or form of debt is costing you the most amount of money over the life of the loan. Chances are it is your Credit Card, followed by your student loans, followed by your mortgage, followed by your car loan. (Credit card debt is the worst as it has the highest percentage) Decide which one you need to tackle first. Bankrate has a wonderful loan calculator. Once you have decided on the loan you want to pay off first, put all your extra money on that loan. Do not spread out your extra money, or else you will not be paying it off faster than the interest is accruing. You just took one more step to being able to live debt free.

Snowball those payments!

So you have created positive cash flow, tracking your money, and you have decided which loan to tackle first. Congrats, you are well on your way to living debt free! But the key to living debt free is to snowball your payments. Say you are paying $125 dollars on one loan and you get that one paid off. Do not spend that money else where, take your $125 and apply it to your next loan. That way you are applying your standard payment of Loan B, say $50 , with the extra $125 from Loan A going towards your principal. This is the absolute quickest way to get out of debt. When you are making extra payments be ABSOLUTELY sure that your additional payment is going directly towards your principal if possible. I recommend that you check out the book Millionaire Mind by T. Harv Ecker! Good luck and here is to living debt free!