Six easy steps outlined to help you on your journey to debt freedom. Here is a break-down of how you can get started and practical tips along the way!
- “Reverse Budget” to Tackle Debt Freedom – Scrutinize Your Spending Over the Last 90 Days
- Slightly controversial take, making a budget should NOT be your first move in tackling debt. Instead of focusing on where your money will be going, we’re going to first look at where it has been. Pull up statements from both your debit and credit accounts and track every purchase you’ve made in the last 90 days. Knowing where your money has been going will help you be able to accurately plan for future months. Taking inventory of your spending habits is a vital key in creating a budget! Pro tip- use our FREE expenses tracker to get started! https://mamas-money-move.ck.page/603716aa04
- Compile a List of Your Debts
- Step 2 on your journey to debt freedom: list out all debts. From small credit card debt, to student loans, cars loans, mortgage, etc. Make one master list of all types of debt you have. Next, write the amount you owe, when (roughly) you took on this debt, and what type of interest you are paying on it. I know this is not a fun step, but it will be so much easier to get started once you know where your money is going!
- Slice & Dice: Get a Highlighter Ready and Dive into the Tracker from Step 1
- Print out your expense tracker and highlight any expense that you think could be cut. Everyone’s road to debt freedom is different, but let’s see what can be cut! Some examples of common cuts: snacks at work, coffee on the road, date nights, and extra babysitters!
- Tackle Your Debt
- Whether you decide to use the snowball method (tackling the smallest debt first and working your way up), the avalanche method (targeting the debt with the highest interest rate), or something in between, outline which debts are priority to pay off in the upcoming months.
- Create a Budget
- Now that you know where your money has been going and what you still owe, it is time to make a budget! I am not going to outline what all you need to cut out. Everyone’s debt journey is different, and while some people want to be more aggressive with weeding out the debt in their life, others want to start slower. The important thing is to know where your money is going, and make decisions now that your future self will thank you for!
- Consider Debt Consolidation
- While my favorite advice for tackling debt is to rework your finances to get it paid off, there are times when debt consolidation can be considered. Consolidating debt can simplify your debt journey by only having to make one type of debt payment. This can also help with handling those higher interest rates by transferring to a lower interest rate loan. Sometimes even a balance transfer credit card should be considered. Note: make sure to double check the interest rates and see if there is a transfer fee. There are many cards that offer 0% transfer fees.
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