“How do I become debt-free?”; “Where do I start with budgeting so we can pay off debt?”; “How do I start with debt free living?” these are all statements that I’ve received from readers countless times. When you’re struggling to pay off debt – just where the heck do you begin?
Well the easy but not-that easy answer…
Step 1: Budget
Yep, the first place you need to start is with a budget. After all, how the heck are you going to pay off debt fast if you don’t know how much money you have to pay off the debt with? The key to becoming debt-free is in how to manage money better and there’s no better way than to budget.
The Quick-Start Budget (perfect if you’ve never created a budget before)
Step 2: Debt Free Living – Plan of Attack
How are you planning on killing off the debt monster? Are you going use the debt snowball method or the debt avalanche method? In case you’ve never heard of these two methods here are their definitions:
Debt Snowball Method: In this method, you pay off the lowest balance debt first and then “snowball” up from there to the next lowest balance debt.
Debt Avalanche Method: In this method, you pay off the debt with the highest interest rate and then “avalanche” from there down to the next highest interest rate debt.
Once you’ve decided which method you’re going to use to become debt-free, start developing your plan of attack by listing out the debts in the order you plan to pay them off.
But here’s the most important rule to becoming debt-free….STOP USING DEBT. Yep, if you want to truly become debt-free you need to stop using debt once and for all.
Debt Free Living Articles
Step 3: Saving for a Rainy Day
Okay, so this is a little misleading because really you should do Steps 2 and 3 at the same time because if you don’t have any money in savings it’ll be a challenge to stay away from debt. So, if you don’t have any savings, now is the time to start saving for that rainy day.
Don’t forget that every little bit helps and that by following some basic tips for saving money – like saving money on everyday purchases, switching insurance companies, etc., you could potentially save hundreds without even really trying!
Our Beach Vacation on a Budget (How We Paid Cash for Our Vacation)
This isn’t a perfect science, but if you want to become debt-free and stay debt-free, then you’ll need to budget, save for a rainy day, and kill off the debt monster as fast as possible. I know it’s a challenge but our family is living proof that when you manage your money well, you can achieve great success.
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