I asked my readers at ZenHabits.net to give me their best advice for getting out of debt—and boy, did they deliver. More than seventy chimed in with some amazing advice, sharing success stories and failures.
To take advantage of all the great advice, I’ve compiled a list of the best fifteen tips below. I hope it will serve as inspiration for those who are trying to get out of debt. It is not a step-by-step guide. It is a list of ideas and advice from different people. Find the tips that will work best for you and try them out.
1. Stop spending. You have to really, truly want to do this. Otherwise, you’ll put yourself on a financial diet and then crash and burn, and find yourself justifying why you deserve to spend so much money on a new iPhone when you have a perfectly good phone and $20,000 in debt.
2. Stop borrowing money—no matter what! This means no more credit cards, no more car loans, no more cash advances, no more home equity lines, etc. If you can’t afford to buy something with cash you have now, then you can’t afford to buy it.
3. Pay yourself 10 percent first. Put this into an account that is hard to touch. A money market account can earn good interest. Make sure it is a chore to get the money out (you have to drive to the bank) so you will only tap it consciously and for major expenses.
4. Find your purpose. Is it your children, to start your art business, work from home, free money so that you can give? Finding motivation beyond the money drives our passion. Otherwise, our drive is limited. This passion will lead us to find out the “right” things to do like stop borrowing, creating budget, etc. Take a look at the things you value deeply and view that framework to judge your actions buy.
5. Examine your expenses and eliminate the unnecessary. Thing about gym memberships you’re not using, cable TV, Netflix, other types of subscriptions, and see which are least necessary.
6. Got a raise coming up? Earmark it. Pretend it didn’t even happen, and funnel all of the new money into the debt relief.
7. Change how you think of money. Calculate how much money you make (net) per hour. Do this regardless of whether you are a business owner, salaried, or hourly employee. Now apply the time factor to any purchase you make. For example, is that 32-inch flat screen television you’re thinking of purchasing worth ten, twenty, or thirty hours of your time. Once the dollar amount is removed from the equation and the time factor applied, spending habits can change overnight.
8. Debt slavery. Realize that (almost any) debt = slavery. If you don’t mind debt, why get out of it?
9. Pay off your smallest debt first to get the momentum going. Some people go by the rule to pay the highest interest ones off first, but others like the rush from paying a card off completely and closing it. It’s a great motivation to continue.
10. Be willing to make sacrifices. Remember, you own things. They do not own you. We had to sell one of our cars and get a “beater” but this was the best move we could have made. It was so empowering not to have a car note hanging over our heads.
11. Put a note in your wallet with this text: “Do I really, really need this?”
12. When you make your budget, be honest. Make sure you budget for gifts, entertainment, and whatever other things we all spend too much money on and don’t like admitting.
13. Make more money. Sometimes you can only stretch your current income so far. But how can you start an online business without spending a lot of money? And without your own product? By selling other people’s products as an affiliate.
14. Create a balance sheet and update it every month. List your assets on one side and your liabilities on the other. Assets should only include things you can easily sell and there approximate value. Liabilities should include all of the money you owe others. If your starting value is negative, your goal should be to make that number smaller every month. If your number is positive, your goal should be to make that number larger every month. The real value of this exercise, though, is it puts you in the habit of checking your financial situation every month, which will reinforce habits that are increasing your wealth and hopefully allow you to catch and stop habits that are decreasing your wealth.
15. Read the book: How to Get Out of Debt, Stay out of Debt and Live Prosperously by Jerrold Mundis. Once you’ve read it, read it again.
I hope this serves as a valuable resource—let me know what you think in the comments, and feel free to add your tips.
By Leo Babauta of BettyConfidential