Achieving a debt free lifestyle is a noble goal. I talk with plenty of people who desire debt freedom, but turning a dream into reality takes work. Now this work is not impossible. Quite frankly it’s very doable. You just have to work it.
The first step in any personal finance course of action will be to know your status. Knowing how much you have coming in vs what you have going out. That’s called a budget.
A budget can be as simple as you’re A,B,C’s:
- Account for all income sources
- Be specific about your expenses
- Commit to create a budget on a regular basis (How to Run a Fabulous Finance Committee Meeting)
You don’t need fancy software or sophisticated spreadsheets to create an effective budget. Get the basics down (income minus expenses) in written form. That’s a great start.
With your financial snap shot in hand, you’ll be better able to determine whether you have an income problem or a spending problem. Here’s how you can tell.
- If you have, on paper, more than $200/month to redirect toward paying down debt, but don’t realize this extra income each month – you may likely have a spending problem.
- If you can’t find an additional $200/month after you’ve objectively gone through your budget, listed all of your monthly debt payments at their minimum payment level, and marked areas of excess for elimination (or at the very least significant reduction), more income might be your next area of focus.
On paper you should have more money at the end of each month. In reality, you may find yourself borrowing from savings or friends and family to cover necessities. You work hard every day, but can never seem to figure out where your money goes. You know you should be further along, but money burns a whole in your pocket.
If spending on impulse without a clear picture of your financial snapshot is a regular occurrence, you may have a spending problem. Blurring the line between a need and a want, carrying balances on credit cards, or an inability to remember what those balances represent may all point to signs of a spending problem.
There is good news. Spending problems necessitate a change in behavior. You may very well have the resources needed to right your financial ship. For those with a spending problem, consider the following suggestions to make adjustments in your regular routine to get a better handle on managing your money.
- Improve Your Financial Literacy. When you know better, you can do better. Learning about techniques to help you better manage your money will help you develop the confidence need to improve your financial life. My book, The Great Debt Dump, is one such resource that will help you develop a plan to attack debt and reach your fiscal goals.
- Create An Accountability Team. You are 33% more likely to reach your goal if you:
- Write down you goals,
- Share them with a friend, and
- Review those goals weekly.
Applying positive peer pressure to your financial goals is a great way to overcome your poor spending habits. Connecting with responsible accountability partners can do something as simple as remind you of the goals you’ve set. At a minimum, you can join forces with a team that uses the Power of Community to help you dump debt.
- Use Cash for Grocery Shopping. Shopping for any non recurring items can be challenging to manage. Shopping with cash is a great way to avoid overspending. This process does require planning, but it’s a great way to develop a disciplined spending habit – even if you decide to revert back to debit cards eventually. For more great tips on reducing your grocery bill, listen to the interview with Steve and Annette Economidies on Tame Your Grocery Bill with Simple Ways to Save.
- Stop Carrying Credit Cards. Enough said.
- Spend with a Plan. Once you’ve determined a need must be replaced, shopping with a plan is always a great idea. Heading to the grocery store with a list helps you avoid impulse buys. Shopping online versus browsing at brick and mortars can allow you to easily cost compare and stay focused on the target items. Understand your budget blowing triggers and work to avoid them or at least minimize their impact.
You have the money to accomplish your goals, you may just need help or the discipline to redirect the funds in a more productive direction. While not easy, small changes can lead to long term success.
An income problem requires a different approach. Obviously, no one can squeeze blood from a turnip. If you’ve confirmed with an objective third party that your budget contains no excess or spending on unnecessary items, then it’s time to look at additional ways to generate income. Your goal should be to generate $500 to $1000 extra per month in order to attack your debt
- Investigate opportunities to generate more income with your current employer. Can you work more hours, take on new projects, or apply for higher paying positions. Maximize your income potential with your current employer first.
- Side Hustle Required. Add a side hustle during your off hours, where possible, to leverage your skill set and earn more money.
- Take on part time work. Job boards like FlexJobs.com offer a variety of employment opportunities with flexible hours and/or location requirements. Unlike the major job sites, all positions are screened individually to ensure the scam entries prevalent on public job boards do not get posted.
- Lifestyle changes. You may need to consider changes to your living arrangements, transportation options, or reducing/eliminating other recurring expenses.
A debt free lifestyle is an attainable goal. We’ve talked to many people through the Midday Money Show who have taken on the challenge and emerged victorious. You can as well. Check out the podcast tab for a list of past shows or subscribe on Stitcher Radio as a source of motivation to stay focused on your goal. Always remember, you’re not alone in this. We want to help you be victorious.
Before you go, get your FREE copy of our tips to save more money!