12 Steps Towards a Debt Free Life - Part Two

Getting Out of Debt Takes Time - But You Can Do It!

Part two of 12 Steps Toward a Debt Free Life finishes detailing the things you can do to reduce - and eventually pay off - your debt.

Step Seven: Create a Debt Snowball

So far in our 12 step how-to, you’ve organized your debt, set up an emergency fund, and you’re working on spending less. You’re now ready to start getting rid of that debt — for good!

Choose the debt you’d like to pay down first. Financial expert Dave Ramsey suggests starting with the smallest debt and working your way up. You can also choose to start with the debt that carries the highest interest rate. Either way, once you’ve paid down the first loan or line of credit, you’ll move onto the next and continue to work your way through all remaining debt until you’re completely debt-free. Hooray!
If you struggle to remember deadlines, minimum payment amounts, or to keep track of all your debts in general, a debt consolidation loan may be your answer. Consolidating debt allows you to essentially bring your total debt balance under one lender. You could take advantage of lower interest rates, a lower total minimum payment, and more. Contact Education First at (409) 898.3770 to speak with one of our pros and find out how debt consolidation could benefit you.

Regardless of how you do it, paying off debt is your top priority. Be sure to make the minimum payments on all other debts, but any extra money you have at the end of the month goes back toward the first one. Start with the minimum payments you’ve been making, and add the money that was previously going into your savings account to create your debt snowball. Whenever possible, try to add money to your snowball to accelerate your progress.
Doesn’t this feel great? You’re on your way to a debt-free life!

Step 8: Boost Your Income

Increase your income to help you pay down debt.

There are a handful of practical ways to accomplish this. For instance, consider asking for a raise or promotion at your current workplace – don’t be afraid to do this! If you can justify the raise, chances are you might just get it. Or, it’s always possible to seek employment elsewhere if you feel you’ve reached your maximum earning and growth potential at the company. You can also freelance, take on a side job on weekends, or a seasonal job for just a few weeks a year. You could also consider offering consulting services in your particular field.

Remember: any extra money earned goes straight towards your debt snowball!

Step 9: Add Your Windfalls to Your Snowball

Let your debt snowball grow by packing it with all your unexpected windfalls. Seasonal bonus at work? Add all or most of it to your snowball. Unexpected refund? Let it go toward paying down your debt. Birthday gift money from Great Aunt Sally? You know where it’s going!

It isn’t easy to say goodbye to an unexpected windfall, but all that extra money will help you reach your goal that much sooner. When you’re debt free, you’ll be able to feel good – not guilty - about treating yourself every once in a while.

Step 10: Make It Automatic

Now that you’re maximizing your payments toward the debt you’ve prioritized, make sure it happens by automating your payments. Set up an automatic transfer in your designated amount from your checking or savings account to that debt each month, and it will be well on its way to disappearing!
Education First’s debt consolidation loan also allows for automated payments with no transfer fees from your other EFFCU accounts. Click here to learn more about our available debt consolidation loans.

Step 11: Track Your Progress

Update every bit of progress you make on the debt spreadsheet you created. Keep your spreadsheet in a visible place so you can quickly and frequently track your progress.

Watching those numbers shrink will give you the motivation you need to work harder and make it all happen even quicker. Just imagine - one day, you won’t owe anyone a single dollar!

Step 12: Celebrate!

Is your debt shrinking? Have you gotten rid of one of your outstanding loans or lines of credit? Well then, it’s time to celebrate!
Take time to celebrate every small goal you’ve reached on your journey toward paying down debt. You don’t need to spend much to celebrate an achievement; find inexpensive or even cost-free ways to reward yourself. Treat yourself to an hour with a gourmet coffee and a good book, take a long walk on a pretty day, or go out to dinner. Find the little luxuries that make you happy, and celebrate big! You deserve it!