Not having enough money to pay the bills and continuing to accumulate debt is stressful and it becomes a burden. It’s not easy to get out of debt and stay out of debt. However, if you want to get out of debt, it’s going to take sacrifice, discipline and hard work, but in the end it will be worth it. Once you get out of debt, that burden of debt hanging over you will be gone and you’ll have a financial peace of mind. You’ll also be able to take that money that was once going toward debt and instead use it to do things that are important to you and your family.
Watch the 4 Tips to Get Out of Debt video below so you can put yourself in a better financial position. This is your year to get your finances in control!
I didn’t explain how the debt snowball works as well as I wanted to on this video, so here is more of an explanation. Here is an example of how to use a debt snowball if you had the following debts:
Debt 1: Store Credit Card $400 Interest Rate: 7% Minimum payment: $25
Debt 2: Credit Card $4,000 Interest Rate: 14% Minimum payment: $70
Debt 3: Car Loan $10,000 Interest Rate: 4% Minimum payment: $250
Debt 4: Student Loan $15,000 Interest Rate: 3% Minimum payment: $150
First, pay the minimum payments on all of the debts each month, then start to get rid of them one by one. For this example, we’ll say that you find an extra $300 a month in your budget by earning extra money from a side job and cutting your discretionary income. Note: To pay down your debt sooner, look for jobs to earn extra money. This may be watching children, delivering newspapers or cleaning houses. Also, look into selling items around the house by determining what you can live without, and then hold a yard sale or sell the items online. Since the first debt is small, get it paid off quickly.
For Debt 1, you’ll pay $325 toward it (this is the $300 extra income you find + $25 minimum payment) and you’ll have it paid off within less than 2 months. Now take that $325 and put it toward Debt 2. When you do that you’ll be paying $395 toward Debt 2 each month ($325 + $70 minimum payment). Once Debt 2 is paid off, then take the $395 and put it toward Debt 3 so you’ll pay $645 toward it each month ($395 + $250 minimum payment). Then once you pay off Debt 3, you’ll pay $795 to Debt 4 each month ($645 + $150 minimum payment) until it’s paid off.
You can also read the post 4 Important Steps to Get Out of Debt, by heading over here.