You can pay off all debts! Even if someone is in debt up to ears, wa all are able to get out of every difficult situation. I am a big fan of the debt reduction strategies described in many books. I would recommend this post to anyone who has any debt. If you are debt – free, it’s good to know these methods (if you will be in a difficult financial situation, you will know how to behave).
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The biggest financial problems are caused by a lack of financial education and simply a lack of experience. Look around. Media feed us with ads with loans, credit cards, expensive toys (car, holiiday loans, etc.). Going to the street you see the ubiquitous banners with credits, loans, accounts. We are living in society where debt is almost natural. That’s why we can be in a difficult financial situation. Fortunately, every problem can be solved. Sometimes it requires many sacrifices, sometimes it is very simple to do it – requires only a change in the decision. Regardless of whether you have a little debt, or you’re in debt up to ears, read the best debt reduction strategies here. If you break free from debt loop, you’ll finally feel free.
This article applies to all kinds of consumer debt, loans, credit, eg. Cars, personal account and credit cards (most common) etc.
Debt is the biggest, most dangerous, most brutal enemy on the path to financial freedom. If we have debt, we are not able to think rationally. Debt deprives you of hard earned money. It’s difficult to save / invest money when you have interests “on your back”. This often leads to frustration and can cause many diseases (stress factor indicates). Debt holds us in a position, where we need to to go to work every morning. No one likes to pay interest. We are become like modern slaves – working for the creditors. Debt lead our life to become hell on earth.
Debt reduction strategies, which are presented in this post, are based on methods I’ve learned by reading the book “Cashflow Quadrant” by Robert Kiosaki. It is also presented by Dave Ramsey – the author of the very popular radio show “The Dave Ramsey Show“. Dave himself helps thousands of Americans on debt reduction.
How to get rid of your debts?
Debt relief is one of the most hot financial topics on Google. This means that many people have had problems.
The first and most important step on the road to effective debt relief is to change bad financial decisions into good ones – a change of attitude to money. This is the fastest and most challenging part of the whole process. Your decision will be crucial and will impact on the state of your finances. You must necessarily abandon the approach, that the loans and credits it’s nothing serious. Otherwise, you will continue to be stuck in debt, and you will forever pay off the interest.
We need to necessarily change the approach, like: “I’ll pay off all my debt somehow and sometime” You must act quickly, decisively and prudently. There is no place for jokes or being at ease. You are going to war, and the only way to win is to get rid of all debts! To fight, you need to release any emotions. You must hate the fact that you have debts. You need to change it!
Don’t borrow any more money or take on any more debts.
Do not increase your debt! The first thing you need to do is to tell yourself that from now you won’t create any new debt. No new loans, nothing! Do not count on any financial assistance. For you credit cards and loans does not exist! Start paying off current installments regularly and slowly come out of difficult situations. Robert Kiyosaki in his books writes clearly, “cut up your credit cards.” I suggest you do this as soon as possible! Do not count on revenue from cashback programs or discounts. They are not an option for you! Your financial goal right is: get out of debt as soon as possible! Besides cutting credit cards is fun – try it yourself!
Where to get the money?
Now is the time to pay off debts. You need to find additional money source. If your debt is $ 1,000 per month, you need to have eg. $ 1100 to start the strategy. Your task is to repayment of the debt as soon as possible.
Where to get the extra money? Good question. Do you already use the Balance Sheet? If not, you need to use it to review all expenses and income. Without good data, you can’t act property! The biggest advantage of the balance sheet is aware of what expenses are necessary, and which may be removed.
You have 3 options
- Locate and eliminate all unnecessary expenses.
- Sell everything you don’t need.
- Find additional source of income.
1. Necessary expenses are: health, food, medicine, home / flat, clothing, transportation. The rest of expenses are less important. You have to go into “survival mode” or find new source of extra income. Nothing will happen if you do not buy new smartphone, app or clothes this month. Stop eating and drinking only on the town. Buy wisely good and cheap products
2. If this is not enough to move over on, try to sell something. See what is unnecessary for you. Can you sell it? Make a list of all the things that you do not need. Take advantage of online auctions and sales services. Prior to the issuance of the subject see the fees and commissions of each service.
3. If this is not enough – then you need to increase income. Are you working 40 hours a week? Work longer. I’m not talking about a full-time job (although if it is the only opportunity you can do). Find other part-time jobs, ask for overtime, take more projects in your company, start to train staff, deliver pizza, start to ride a taxi, clean up someone else’s apartment, cut grass, do translations texts at night, and most of all CREATE PASSIVE INCOME. Act as if you were collecting money for the operation of your child. In the end, your financial goal is your child! Nothing dishonors when it comes to these situations. Get ready for making good decisions. Of course, you will have doubts, but remember you are in difficult situation. You MUST act! Involve the whole family to help! Your family MUST have the same approach to the payment of debts as you. Progress in getting rid of your debts will have a positive influence on everyone. You will not make changes until if the family understand your idea of war with debt
Take next step and read again all contracts with banks and / or interesants, plus all agreements that you have signed! You need to know everything about our debt and find the best solution.
What debt should I pay in the first place?
If you have many different kinds of debt, choose the one you want to pay off as first. Make a list of debts and determine their priority. For example, the worst debt, mark as “A”, the second – “B” and so on. Try to pay every debt at “minimum” rate, and put extra money on first one. I propose to set debt reduction list in the order:
Start with current debts for the necessities of life – electricity, water, gas, heating, etc. You have to live normally and not go crazy.
Then start to pay off loans and debts with the highest interest rate (loans, interest on credit cards, and debts marked with letter “A”). Check in contracts if the banks do not charge fees for premature repayment of the loan! After that, pay off loans with lower interests rate.
Why using this order? The idea of this example is to make the real and quick change! Each visible success will motivate you to continue the hard work. Even the smallest success will give you more energy and better feeling.
Now the important point. After you remove first debt, you need to transfer all money you put to that debt into second debt in the list. So, pay off all debts the same as before (at minimum), but the second one will be payed at the minimum + all money from debt one (debt one is fully payed). Thus, any surplus we throw at first debt of the list and the other serve the “minimum” required manner.
Everything seems simple but in reality it is quite time-consuming process. You must be patient and have the will to fight. I have never been in a situation where I must pay multiple debts. I just could say “No”, but I have had some knowledge on the “tricks” used by bankers, loans programs and accounts. Unfortunately, I also know, that these “marketing tricks” led many people to debt trouble. Banking practices are not acceptable. For them ONLY profit counts. Therefore, every banker (the seller) will offer you the best agreement for the bank (as was the case in Poland – real estate loans in Swiss franc currency). Fortunately, in the life EVERY problems can be solved.
Elimination of debts.
The most important thing is to take action. For example, if we are able to add 500 $ per month to our monthly budget, we pay off every debt at minimum, and one with additional money (minimum for debt + 500$). This way we got rid of the most problematic debt. Moreover, in the next month, if you can get another $ 500, you will be able to repay another debt the same amount of money.
Important note: the first debt cost us (for example) 100 $ per month. When we pay it off, we take the money: 100$ +500$ extra monthly income. Then we put all 600$ to second debt from our list. The rest of the debts we paying off as before (minimum rate).
When we get rid of the second debt, the amount of 600 $ will attack another debt in the list. In this way, If, for example – you pay 150 $ minimum interests to that debt, you will attack debt with + 750 $ per month. Clever? This is the best and fastest method of debt reduction. We do it with more debt until we are free.
Simple? In theory, yes. Unfortunately life is more complicated. Theory theory, but remember that each strategy will be accompanied by emotions. Psychology plays an important role here. You will have moments of doubt, extreme fatigue, quarrels, nervousness. Loans advertising will tempt you more than ever. Desire to return to an earlier life will be enormous. YOU ARE THE LORD OF YOUR FATE AND YOU SHAPE YOUR DESTINY. Remember sentence, that finances are solid. Black and white is always black and white. To reduce debt you MUST be consistent. Snowball method really works. What’s more – this is the BEST and most commonly used method of debt reduction. This strategy helped many people. You just HAVE to hold on and go straight to the point.
- Change your attitude towards your debts. Debt is the worst evil with which you have to fight quickly and effectively.
- End of taking out another loan.
- You need to earn more money than ever before. To do this:
a) Make a budget and remove all possible expenses.
b) Sell you unnecessary stuff.
c) Find additional revenue.
- Do not act alone. If you have a family – work together! Always!
- Prepare a list of debts and determine the priority of repayment in the correct order (the first, worst debt as A, the second as a B, and so on).
- Use the snowball effect, paying off debts using additional money from past debts.
Thank you for taking the time to read this post. I hope that this strategy will help you. If you know someone who is content can be useful, please send the link, like this page or share the article on Facebook. Thank you in advance!
I invite you to leave questions and comments. I will try to answer even the most difficult question.