I was sitting with about $10,000 of consumer debt spread across a few credit cards. I had a few rough years where my fixed expenses matched my income. I needed groceries, gas, and to be honest I was young I spent money I didn’t have.
I never missed a payment but I found for a three year span every payment I was making was offset by spending. I wasn’t making an impact after three years I was in the same spot. So how did I do it? How can you get out of debt? A few great steps are below.
Remember that this is just a suggestion and any services mentioned may not be right in certain situations. If you have any questions please comment, I will be more than happy to aid in achieving your goals, answering questions.
The book Richest Man in Babylon illustrates a great way to lower debt quickly. It describes a man from ancient Babylon who tells of him and his wife owing a large sum to one of the kings men. The man goes on to explain how they end up paying and borrowing more, making no progress toward eliminating the debt.
He is encouraged to do the following. Learn to live on 70% of his earnings, the son of the richest man in Babylon, Arkan, says “If thou cannot live upon seven tenths of thy earnings than you must learn to.” Arkan’s Son is trying to explain that the main problem is the spending. You must learn to control your spending.
How to control your spending
Spending is easy, just take a walk around your neighborhood. Every business is trying to entice you to spend your hard earned cash for their goods. Eventually you will be hungry and the taco restaurant smells great, your walk made you hungry. But don’t give in, try and remember that you are in the red, for what ever amount. Picture that amount, the large red number slowly growing interest and not moving because your spending you extra cash.
Try to find ways to slow down spending, pack lunches, no frivolous nights out, canceling subscriptions. I was also attending school at the time and a good portion of my debt was from text books and required online programs like MyMathLab. The Later being unavoidable, I have a trick for any college student.
A friend once taught me how to get any college text book for free. She is a wise saver building a large account with small earnings. It is because she lives like this, she doesn’t spend, even on items some deem necessary.
Before the semester started she would head to the library with the list of text books. She would ask the librarian to read them, as most schools will have one copy on hand. They don’t allow you to remove the book from the library. You could copy and print each page, eating away any free printings your school provides or pay for each one equally about the price of the used book anyway.
What you need to do is grab your phone, start a video and begin turning every page. Yes it takes quiet some time but the end result is a free text book, you can access anywhere. Simple open the video, find the pages you need and pause. You can zoom in and save a bunch of money over the long run.
I love this example because it teaches you to become creative. Being creative with your finances not only stop spending, they allow you to spot opportunities to earn, but thats another article. The next lesson from Arkan’s Son was to use two tenths of your earnings to pay your debts.
Every check take 7/10s and live on it, take 2/10s and pay down your debts. If you earn $2000 a month thats $400 dollars. Over one year thats $4800. This sum can quickly put a dent into any amount.
But first you must learn to live on that 7/10s.
What about the last tenths of my earnings?
You should know what I’m going to say, if you read any of my other articles you will know already. At least I hope you do. Pay yourself! Just because you owe money doesn’t mean you shouldn’t be growing you savings. A lot of financial advice out there says to pay down debt but let me tell you a story.
Why you must save money while paying down debt
I was working as a kitchen manager while I was paying down my large debt. I was making alright money and was living on 7/10s, paying off debt with 2/10s and saving 1/10. My roommate at the time would always tell me just use your savings to pay off a large chunk of that debt! I would tell him no I couldn’t.
That roommate and I moved in together because he hit hard times, I had too. We needed to spit the rent and him being a long time friend I figured we would make good roommates. No complaints on that he was a great roommate, but when he found a good job and realized he had a ton of extra money he wanted to move into his own place.
Here I was still in tough times but now losing my apartment, but the story gets better. The owner of the restaurant I managed called me one night. He sold the business to someone who wanted to change the whole thing, I was out. I had two weeks before I lost my job and four weeks before we needed to move out.
For anyone who has had an apartment, they know most landlords want you to prove income and showing a pay stub from 2 weeks ago is shady as you should be paid recently.
luckily for me I was able to claim unemployment and use my savings to prove I had money. I showed bank statements to back up the claim that I could pay the landlord. He was very under stable but asked for the whole rent upfront. Now Im not going to blow my savings on another mans mortgage so we negotiated to, security plus first and last month. If I had spent my savings on my debts I might have not been able to secure housing for myself and that is a scary thought.
ALWAYS SAVE 10% OF YOUR EARNINGS, BUILD YOUR WORTH.
Consolidate the debt
This tip needs some research. If you have one card with debt than don’t. If your debt is spread out between multiple cards than maybe consolidation is right for you. Consolidation is where a company, mostly a bank, will pay off your cards. They take on all the debt and than you pay them instead. This will lower the total amount of interest you end up paying.
Be aware, do the math, sometimes these consolidations have a crazy interest rate, and if you had just balanced transferred to a better card with a better rate you may have saved money. For example American Express is known to have balance transfers at 0% interest with a 5% fee for the first year.
Always do your research. I used balance transfers to avoid interest not consolidation. Like always if you have questions ask them in the comments.
I hope me sharing my experience can help you not only feel less alone, it’s easy to get into debt don’t feel bad about it. It’s harder to get out of it but lets do it together. A passion of mine is to help people financially. I do offer small business services for a fee, but for individuals I am willing to give free advice and consoling.
Do not be shy if you are struggling or need some advice financially leave a comment or send me a message. There is nothing I love more than more success stories to share with my readers.