Thank you so much to Wells Fargo for sponsoring today’s post about the three first steps I took to start paying off my debt.
Are you in debt? Do you want to pay your debt off, but you’re so overwhelmed, you’re not sure where to start? You aren’t alone. Getting into debt it so easy (and dare I say, even fun!), getting out of debt… not so much! You need patience and perseverance and a whole lot of will power. There are a few theories on how to pay off debt the quickest (this website gives you a rundown of them), but in my opinion paying off debt should always start with three first steps.
My credit story is likely similar to yours. I though credit was completely normal and carried a balance of about $6,000 as a young adult. I didn’t need a single thing that I put on that card, but never thought much about it at the time. I figured I had tons of time to pay it off. I met the man of my dreams and absolutely fell in love. I happily married him, his Visa, his MasterCard and his $320,000 mortgage on a house worth $240,000. I wouldn’t take it back in a second. It was the best decision I’ve ever made. However, having quintupled my debt almost overnight was a pretty intense wake-up call and changed the way I thought about credit.
We got very serious about getting our spending under control. As we’re (finally!) seeing the horizon on being debt free, I can tell you the first 3 steps that we took to get started. Looking back. These steps were the most important steps in the whole process.
Everyone thinks they know about debt. Debt is bad. Saving is good, yada yada yada. But we don’t really understand the impact of debt. If we did, we likely wouldn’t be in debt.
How much have you paid in interest on your debt in the last 5 years? How long will it take you to pay off your credit cards at the rate that you currently make payments? How much extra money would you have to spend as you wish every month if you didn’t have debt to pay off? Don’t know those answers? Then you don’t understand the impact of debt.
Start using resources that will make you understand your situation. I wanted to know the answers to those questions and more. I wanted to know exactly what I was sacrificing when I didn’t pay off that debt.
Read more about managing your debt at the Wells Fargo Smarter Credit Center. https://www.wellsfargo.com/goals-credit/smarter-credit/manage-your-debt/
Make a Budget
There’s no way around this. In order to make any dent into our debt, we had to tell our money where to go instead of wondering where it went. The only way to do that is through a budget.
Budgeting isn’t hard, but it’s a new routine that can take some getting used to. You have to understand that there will be some growing pains as you adjust to a new routine.
We sat down and categorized all of our spending for the last month so we had a “base point” of what we were spending. Then we created a budget from that, shaving off 10%-20% in every category and ensuring that we were budgeting for all of our income. We made a category for debt repayment and as we shaved spending in categories, we would add it to the debt repayment category.
Then we made sure to sit down every single day for the first two weeks to log in new purchases and ensure that we were on track to meet our budget. After the first two weeks, we didn’t check the budget daily, but we sat down once a week to do it and to plan for upcoming purchases.
Set a Small Goal
This is my number one secret in life. Set small goals. Make it easy to “win” as you learn.
As you have successes and not failures, that will snowball you into larger wins and better progress. I had two choices, I could say “I’m going paying off $2,000 of my debt this month” and then failing miserably or “I’m going to pay an extra $50 to my debt this week” and being wildly successful. When you successfully meet your small goals, it will give you the positive reinforcement you need to keep going and your goals will get progressively bigger.
As soon as the very last of our debt is paid off, we’ll start saving to take our dream Walt Disney World trip. There’s a certain sense of accomplishment gained from making better choices, and learning about money and debt as your transform your financial future. Thanks to the knowledge I’ve gained over the past few years, I know that debt isn’t going to be a part of our future. We’re so excited to be able to grow wealth and start working on our longer terms goals after this phase.
What would you do with the extra money you would have if you didn’t have to pay off debt?
This is a sponsored post written on behalf of Wells Fargo, all opinions are mine alone.