Eliminate Debt

Apply every extra dollar each month after necessities toward paying off debt using the debt snowball. Once you have figured out a budget and have raised your beginner emergency fund the next step toward gaining financial freedom is to eliminate debt. Simply put, debt robs you of your financial freedom and will never allow you to build wealth.

What is Debt?

We all know what debt is, but we typically think of it in very simple terms so let’s look a little deeper at what debt is. Credit is used for a variety of different reasons, but it does not change the fact that when we go into debt we are actually prolonging our state of financial servitude. If you are currently in debt think about how differently your life would look right now if you did not have any payments to credit cards, car dealerships, banks, etc. If you did not have these payments would you be able to have your basic needs provided for?

I am not casting judgement upon anyone, so please don’t hear that because I’ve been there, but as a society we take debt too lightly and we do not realize that if we will change our habits and live on less than what we make right now that we will be better off in the future. The reality is that when we take on debt it causes us to live on less than we did previously because we are now paying on a debt with the same amount of income. Debt masquerades as a tool or a help for the moment, but it quickly becomes a burden and we need to change our thinking.

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A Change in Thinking

It wasn’t until someone showed me a different way that I was able to change my thinking about finances. I’m sure that most of us know that debt is not good, but it is normal so it is accepted. I was sick of being normal and was ready to make a change. You will need to be ready to change your thinking too if you really want to get out of debt. Debt may be normal, but it does not have to be. Going through life asking about how much the payment will be might be normal, but there is a better way.

If you have already sat down and figured out a budget and rasied a beginner emergency fund started then you are well on your way to getting out of debt. You have already started to change your thinking, but now it’s time to get even more aggressive. You need to start dreaming about what your future could look like if you were not giving all your money to the money lenders. You need to start dreaming about how your older years could look if you were able to start saving some money. You need to start dreaming about the things you will be able to do versus the things that you will have to do because of a lack of choice. You need to get angry at your debts and get rid of them and swear them off in the future. The cool part is that the more of your debt you get paid off the freer you will feel and you will become even more convinced that debt robs you.

Paying of Debt

At this point you have laid the ground work and it is time to get busy. If you did your budget correctly and told every single dollar where to go and you have cut your wants to a minimum you should have some money left over in your budget to start paying down your debt. You may even be so serious about making a change that you have decided to get another job and make some huge sacrifices for a short period of time so that, Lord willing, you will never have to live like that again.

To start paying off your debt you should list your debts from largest to smallest like I showed you in your sample budget. It is helpful to keep track of how much you owe on each and you need to know what you minimum payments are on each. With your debts listed out from largest to smallest you are going to pay the minimum amount on each debt except for your smallest debt. Once you have made your minimum payment on each of your debts you are going to apply all of your remaining money toward the smallest debt. In the budget below you will see that the extra money was going to building the beginner emergency fund, but since you should already have that done you should start applying your extra money to your smallest debt.

When you are paying off your debts you need to make sure that you pay your minimum each month, but you also need to make sure that any extra money that you are paying toward that debt is going toward the premium you do NOT want to make EXTRA PAYMENTS. Paying on the premium lowers the amount that you owe. Making extra payments sort of lowers the amount that you owe, but by making an extra payment you are also paying interest that you do not need to pay. The goal is to pay your debt off as fast as possible with as little money as possible, you do not want to pay interest so remember that you want to apply anything above your minimum payment to the premium. Do NOT make EXTRA PAYMENTS!

Get the Debt Snowball Rolling

You may not see a drastic change in your debts at first, but once you get your smallest debt paid off you will start gaining traction because now that the smallest debt is paid off you have more to pay on your next smallest debt. Once you get your next debt paid off you will have even more to apply to your next smallest debt and before you know it your snowball is rolling faster and faster and you will start to see that debt melt away because of your intense focus and tenacity at paying it off as fast as possible.

The ability to get out of debt is within you and the speed at which you get you debt snowball rolling will depend on how aggressive you want to get. Selling things, cutting down on unnecessary spending, getting another job, etc. will all help you get out of debt faster, but you must determine in your mind the lengths at which you are willing to go to get out of debt. The more aggressive you get now and the more determined you are now will have a huge impact on whether or not you stay out of debt. If you make some huge sacrifices right now for a short period of time you will remember what debt cost you and you will not want to go back.

Photo by Jeremiah Higgins on Unsplash

Typically people do not include their mortgage in this step and instead choose to start investing money while paying extra on their mortgage and being more generous with their money. Becoming debt free, except for the mortgage, typically takes about two years for people to do. Paying off a mortgage will generally take between 5-7 years when people get serious about it and most people are not willing to wait to start investing that long. Paying off your debt, except for your mortgage, needs to be a priority though and investing should be stopped to help you get out of debt faster. The next step in the process is to build your emergency fund up to a full 3-6 months of living expenses and then earning interest with your money takes hold. If you get aggressive you should be able to do all of this in less than three years and then you can start investing again and get you house paid off as soon as possible!

A Future of FREEDOM

Congratulation! If you have made it this far and have decided to do what you have to do to change your habits and get out of debt then you are doing the things that you have to do in order to start gaining financial freedom. There is more to a future of FREEDOM than just being out of debt though, being out of debt is just the beginning. If you truly want to experience financial freedom you will continue along in the process and you will increase your generosity throughout the process. The only way to truly be free in our finances is to realize that all we have has been given to us by God and that it all truly belongs to Him. By developing a lifestyle and attitude of generosity we break the power that money has over us, but we also have to be faithful stewards of our money and learn to enjoy it within boundaries.

I look forward to hearing from you along the way in your process of gaining financial freedom. Please don’t hesitate to contact me if you would like some help along the way. I’m here to help you achieve your goals and to help guide you toward a life of freedom. You CAN change your financial future, but you have to do the work and the first step is to change your thinking. You can do this, if you put your mind to it. Life on the other side of debt is amazing and it only gets better! Again please call me at 573-208-4266 if I can help you in any way during this process.

God Bless,
Jeremy Lindeman

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