If you are struggling to get ahead on your bills or even on where to start on your financial journey, here are a few tips to get you on the path to financial literacy, with a long-term goal of financial freedom.
Step 3 – Get Out Of Debt
There are only 2 ways to get out of debt. Make more, or spend less. Now that your budget is in place and your goals are set, it’s time to get serious about gaining financial freedom. “The rich rule over the poor, and the borrower is a slave to the lender.” The devil wants you in bondage just as much as your credit card company – and last time I checked, being a slave was the exact opposite of being free!
So where do you start? You need to add up anything and everything you owe to anyone. This includes all of your credit card debt, student loans, car loan, back taxes, the money you owe friends/family, etc. Once you have it added all up, stare it in the face.
To me, adding up debt is kind of like going to the doctor’s office. The worst part of the entire visit is stepping on the dreaded scale. “Have I gained weight? Have I lost weight? Is the doctor going to tell me I need to go on a diet?”
But stepping on the scale, much like adding up your debt, forces you to set a baseline. “I’m currently here, and I need to be here.” It may be painful, but now you can put together actionable steps to where you want to go. There are mixed theories on how aggressively you should pay off debt, whether or not you should continue to save outside of your emergency fund, and so on. Personally, I believe in the power of compound interest.
There is a long-term opportunity in investing money each year, especially while you’re young, while still paying off your debt. Also, if you’ve never heard of the Rule of 72 I’d highly recommend looking into it. There are also a lot of success stories from people who paid off all of their debt and then started an aggressive savings/investing plan. At the end of the day, you need to find a plan that works for you.
Here are some things you can do to start chipping away at your debt:
Sell Your Stuff
In the book of Kings, a woman’s husband dies, and his creditors come to take their sons away as slaves to pay off his debt. All she has is a small jar of olive oil – but God does the impossible because she was willing to do what was possible. If you don’t think there’s money to be made in the possessions you already own, think again.
Donate Your Stuff
There’s a good chance you have too much stuff anyway. Try checking out The Minimalists for ideas on what you can potentially get rid of. In the wise words of Elsa, “let it go.” While this won’t necessarily make you any money on the front end, if you donate items to Goodwill or the Salvation Army, or another charity of your choice, it’s a tax write off at the end of the year.
Get Another Job
Yep, you heard me. One of the best ways to increase your income in the short-term is to start trading your dollars for hours. Pick up a part-time gig. Looks on Craigslist, reach out to friends who may have odd jobs, and get creative with finding ways to make money. Another idea? If you’ve been at your current job for a while and have a good performance record, ask for a raise.
Step 4 – Go on a Spending Fast
Sounds crazy, doesn’t it? What if you only spent money on the essentials, and poured the rest into paying off debt and savings. Anna Newell Jones tried it and cut out $24,000 in debt in a year. What can you live on? What is a luxury that you can get rid of? Have you practiced the art of Delayed Gratification?
Budgeting is hard at first. Changing your habits is hard a first. But it will not go unnoticed. Your bank account will thank you, and so will your future self. You’ll feel like you are gaining control of your life again. It’s tempting to give up, especially when the mountain of debt looks so tall. When you’re feeling discouraged, remember this: “But as for you, be strong and do not give up, for your work will be rewarded.” 2 Chronicles 15:7.
You don’t need to be a Christian to follow this, but if you are, it’s nice to know that there’s some God-backed advice to get you out of debt and set sound financial goals for your future. I know first-hand how daunting and complicated becoming financially savvy can be, so I hope these tips were helpful.
Once you have all of your debt paid off there are more goals to tackle, but this is a great place to start. We’ll visit what to do once you have all of your debt paid off in the next article. Keep on rockin’ your finances, friends!