This is article two in a series of four about breaking free from the shackles of debt. Feel free to refer back to Part 1 and look forward to Part 3.
In our previous discussion, we outlined the first step in your journey to financial freedom – acknowledging the magnitude of your debt. Initially, the reality check can be quite overwhelming, however, acceptance paves the way for action. The quicker you come to terms with your debt, the sooner you can start knocking it down. Instead of suffering under the weight of your financial obligation, embracing it propels you onto the next stage of your debt elimination journey.
DON’T REPEAT PAST MISTAKES
With clarity on your outstanding debt, it’s crucial to avoid falling back into old habits. This requires a complete overhaul of your mindset. Living beyond your means and funding your current lifestyle with future earnings is no longer an option. Carefree spending and self-indulgent shopping splurges need to be curtailed. To get serious about eliminating debt, you need a strategic plan.
DEVELOP A STRATEGY
Equipped with the right mindset, it’s time to delve into the specifics of your debt elimination strategy. Every ambitious goal needs a solid strategy and time frame to avoid becoming an elusive dream. Establishing a deadline requires understanding how much you can spare each month towards reducing your debt and estimating the duration required to clear your dues with this monthly allotment.
Begin by formulating a budget. Though the process might seem daunting for beginners, it significantly eases the journey once implemented. For guidance on designing a budget, refer to our post on “How to Create a Budget.”
A detailed examination of your monthly budget enables you to assess the surplus you can channel towards your debt in addition to the minimum stipulated monthly contributions. Remember, the game-changer here lies in paying extra towards your debt instead of sticking to the bare minimum.
Wondering how to eradicate debt? We present the second part of our guide – formulating a plan!
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DEFINE A TIMELINE
Upon determining the surplus disposable income you can designate towards clearing debt each month, you can deduce a feasible time frame for becoming debt-free. Deciding on a payoff date is a decisive step.
An overly ambitious deadline might land you in a predicament of an unachievable goal. Conversely, setting a seemingly distant timeline might induce complacency, affecting your commitment. Instead, base the date on your surplus monthly contributions. For instance, if you owe $12,000 and allocate $1,000 per month to clear it, you might consider becoming debt-free in a year. However, challenge yourself to do it in 10 months instead of 12. Why?
The extra push keeps you driven, avoids complacency, and encourages you to find ways to contribute more to become debt-free sooner. Wondering how to implement this? Follow our guide on Eliminating Debt – Step 3!
Are you on a mission to pay off debt? Have you decided on a payoff date yet? Have you had to revise it?
