When you\u2019re drowning in debt, it often feels like the world is caving in around you. Your thoughts are swirling and just won\u2019t stop. You\u2019re not sleeping, and you\u2019re worried if your next paycheck will be enough to provide for your family. And then the questions fueled by endless worry begin: How will I make ends meet? How in the world will I cover my mortgage\/rent this month? Will these debt collectors call my boss (how embarrassing)?<\/p>\n\n\n\n
You\u2019re not alone. In fact, 78% of Americans today are living paycheck to paycheck. That means you\u2019re not the only person who\u2019s ever been in debt. In fact, Dave knows what drowning in debt feels like all too well. But he decided enough was enough. And so can you. Choose\u2014right this moment\u2014to start changing the way you interact with money.<\/p>\n\n\n\n
Did you know that personal finance is 80% behavior and only 20% head knowledge? That means with a plan\u2014and a lot of hard work\u2014you can be standing on solid ground in no time. And who knows? You could even become an everyday millionaire. We believe in you!<\/p>\n\n\n\n
What to Do When You\u2019re Drowning in Debt<\/p>\n\n\n\n
Get on a budget<\/p>\n\n\n\n
Doing a budget is one of the most important steps you can take when you\u2019re drowning in debt. A budget is the very thing that will show you where your money is going and why you feel like you\u2019re drowning. But you don\u2019t have feel that way any longer\u2014and a budget will help!<\/p>\n\n\n\n
When you\u2019re making your zero-based budget, you might be tempted to account for all of your extra expenses first.<\/p>\n\n\n\n
But first, you need to make sure your basic needs are met. We call these the Four Walls, and they are:<\/p>\n\n\n\n
\u2022 Food<\/p>\n\n\n\n
\u2022 Utilities<\/p>\n\n\n\n
\u2022 Shelter<\/p>\n\n\n\n
\u2022 Transportation<\/p>\n\n\n\n
Now, after you\u2019ve budgeted for groceries, water, electricity, your rent or mortgage, and gas to get you to work (in that order), you can start assigning any leftover dollars to other pressing needs. Do you have student loans or a car payment? Are those hospital bills piling up? Or maybe your dad\u2019s birthday is coming up and you at least need to send a card. Whether it\u2019s $50 or $500, all expenses must go in the budget. Need to go to the doctor this month? Yup\u2014make sure to put that in there too. Remember: Income minus expenses should equal zero!<\/p>\n\n\n\n
Cut back on the \u201cextras.\u201d<\/p>\n\n\n\n
Now that every dollar has been accounted for, it\u2019s time to see where you can cut back.<\/p>\n\n\n\n
Take an inventory of any automatic payments that routinely come out of your bank account. Maybe you have a $7 subscription to the clean beard club. We\u2019re not knocking beards\u2014especially clean beards\u2014but these kinds of expenses add up quickly. Plus, that free gift they offered you when you signed up is probably long gone, leaving you with a subscription you keep forgetting to cancel every single month\u2014and more beard oil than you know what to do with.<\/p>\n\n\n\n
Don\u2019t get us wrong, we love a good mail day just like the next person. But whether you\u2019re drowning in student loan debt or drowning in credit card debt (or just plain debt), you\u2019ve got to make some pretty big changes. You guessed it: We\u2019re talking about cutting back on these nonessential items and getting your \u201cwant-itis\u201d under control. Here are some tips:<\/p>\n\n\n\n
\u2022 Make coffee at home (skip the $5 lattes until you\u2019re no longer drowning in debt).<\/p>\n\n\n\n
\u2022 Cut back on your grocery bill by cutting coupons and going without the kids so you\u2019re not tempted to overspend on Oreos. Psst: Left overs are your friend.<\/p>\n\n\n\n
\u2022 Don\u2019t even step foot in a restaurant unless you\u2019re working there.<\/p>\n\n\n\n
\u2022 Sell everything that\u2019s not nailed down.<\/p>\n\n\n\n
Pause all investing<\/p>\n\n\n\n
Really? Yep. Saving for your future when you\u2019re living paycheck to paycheck (or worse) isn\u2019t the best idea. At least not yet. If you\u2019re still trying to pay off credit cards, an upside-down car loan, or a huge pile of student loan debt, it\u2019s time to press pause on your future investments . . . temporarily. This temporary pause frees up extra cash you can use to pay down your debt.<\/p>\n\n\n\n
Don\u2019t worry, you\u2019ll come back to this once you\u2019re debt-free.<\/p>\n\n\n\n
Don\u2019t take on any new debt<\/p>\n\n\n\n
None. We know it\u2019s hard (and maybe not what you\u2019ve been used to), but trust us\u2014taking on debt robs you and your family of a secure financial future. Your choices right now can and will impact future generations of your family tree. So don\u2019t take on even another penny of debt.<\/p>\n\n\n\n
Get out your favorite scissors and do some plastic surgery (or as Dave calls it, a plasectomy). The best part? No medical experience required. Yup\u2014we\u2019re talking about cutting up those credit cards.<\/p>\n\n\n\n
You may feel your heart start to race and your hands begin to sweat. But let us remind you: Having a credit card for emergencies seems like a good idea until your next \u201cemergency\u201d looks like your next afternoon coffee run. When you cut up those cards, you\u2019re choosing to put an end to the merciless cycle of debt for good.<\/p>\n\n\n\n
Increase your income<\/p>\n\n\n\n
Now that you\u2019re on a budget and you\u2019ve decided to stop taking on any new debt altogether, it\u2019s time to figure out how you can increase your income. Take a second job or pursue a side hustle that will give you the extra income you need (as quickly as possible) to throw at your debt. Whether that\u2019s working at your local coffee shop, mowing lawns, or driving for a ride-hailing service like Uber or Lyft, you\u2019ve got to bring in more cash.<\/p>\n\n\n\n
We get it. No one wants to work around the clock. But in order to see that mountain of debt turn into a valley, you\u2019ve got to start doing something different. Remember: This isn\u2019t forever. You won\u2019t be skipping out on time with family and friends for the long haul. But in order to get on the right track, you\u2019ve got to start making sacrifices now.<\/p>\n\n\n\n
Start working the debt snowball<\/p>\n\n\n\n
Now that you\u2019ve got some extra money coming in each month, it\u2019s time to start paying off your debt with something we call the debt snowball method:<\/p>\n\n\n\n
\u2022 List your debts from smallest to largest\u2014no matter the interest rate.<\/p>\n\n\n\n
\u2022 Attack the smallest debt with everything you have. Did you sell the couch? Great\u2014throw your earnings on this debt. Keep putting anything extra you make toward this debt until it\u2019s gone.<\/p>\n\n\n\n
\u2022 Once that debt has been paid, take the mini-<\/p>\n\n\n\n
mum payment (plus that money from your second job) and throw it at the next largest debt while paying minimum payments on the rest.<\/p>\n\n\n\n
\u2022 Keep this snowball rolling until you\u2019re debt-free!<\/p>\n\n\n\n
Stop the comparison trap<\/p>\n\n\n\n
Comparison is one of the worst things you could do while you\u2019re getting out of debt, and social media is one of the biggest culprits. If you\u2019re scrolling through your news feed and see your friend (whom you haven\u2019t talked to in years) on a European vacation with her mom, that doesn\u2019t give you permission to plan a fancy vacation too. Nope. Europe will still be there when you\u2019re completely debt-free.<\/p>\n\n\n\n
When you\u2019re in debt and going after your debt with gazelle intensity,* it\u2019s hard not to compare your financial situation with other people\u2019s situations. But here\u2019s the truth: You don\u2019t actually know their financial situation. We don\u2019t know if your friend put her fancy vacation on a credit card. But we do know that once you\u2019re out of debt, you\u2019ll be able to plan these trips of your own. Listen: The Joneses are broke. If you\u2019re falling into the comparison trap, it might be time to take a much-needed break from social media.<\/p>\n\n\n\n
*Gazelle intensity means working as hard as you can to free yourself from debt. Proverbs 6:5 (NKJV) says, \u201cDeliver yourself like a gazelle from the hand of the hunter, and like a bird from the hand of the fowler.\u201d Like the gazelle flees from a cheetah, free yourself from debt.<\/p>\n\n\n\n
Start (or keep) working the Baby Steps<\/p>\n\n\n\n
Have you heard of the Baby Steps? These seven steps are the proven (and practical) way to help you change your life. And now that you\u2019re standing on more stable ground, you\u2019ll want to follow these steps all the way to building wealth and giving.<\/p>\n\n\n\n
Baby Step 1: Save $1,000 for your starter<\/p>\n\n\n\n
emergency fund.<\/p>\n\n\n\n
Baby Step 2: Pay off all debt (except the <\/p>\n\n\n\n
house) using the debt snowball.<\/p>\n\n\n\n
Baby Step 3: Save 3\u20136 months of expenses in<\/p>\n\n\n\n
a fully funded emergency fund.<\/p>\n\n\n\n
Baby Step 4: Invest 15% of your household<\/p>\n\n\n\n
income in retirement.<\/p>\n\n\n\n
Baby Step 5: Save for your children’s college<\/p>\n\n\n\n
fund.<\/p>\n\n\n\n
Baby Step 6: Pay off your home early.<\/p>\n\n\n\n
Baby Step 7: Build wealth and give.<\/p>\n\n\n\n
It may feel like you\u2019re drowning in debt right now. But like we said earlier, it doesn\u2019t have to be this way. Once you\u2019ve had it with debt (and we hope you have), you can climb your way out of it. And remember: You\u2019re not alone in this.<\/p>\n\n\n\n
\u00a9 Lampo Licensing, LLC. All rights reserved.<\/p>\n","protected":false},"excerpt":{"rendered":"
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