The World Series is here, football season is in full swing, school is in session, and the weather is shifting.
Fall has a way of running along faster than we realize.
It’s kind of like our financial picture: things can change REAL fast, and before we know it, we can be buried under a pile of something that we’d rather not be under.
If you or someone you know are struggling with debt, this email’s for you (or for that someone you know).
We see many clients struggling with debt and of course we also have had our own struggles over the years.
We’ve also seen many clients get OUT of of debt, or successfully avoid dangerous levels of debt in the first place…one amazing part of being a tax professional, after all, is being able to learn from our financially savvy clients about what they do and share those techniques with other clients who may need that information.
According to a Pew Survey on Debt, at least 80% of Americans are trudging through some sort of debt to their name.
Now, before we go any further, let’s address two forms of “debt reduction” that might come with some setbacks…
- Debt Settlement: This method means inviting a third party to negotiate out of standing debt in your name. However, this can be deceiving in that you often end up paying more out of pocket than if you had just taken on the debt yourself.
- Debt Consolidation: The consolidation method is used by companies that essentially roll all your debt into one lump sum, then charge you at a lower interest rate. And although that seems nice to start with, it (usually) just means you’ll be in debt for a longer period of time.
Options such as debt settlement, debt consolidation, and even bankruptcy can be the right option(s) in certain situations. However, one has to be very careful that these shortcuts do not prove even more costly in the long run…
Let’s look first at three simpler methods you can use to get out of debt. Of course, nothing worth doing well is going to be a quick fix. But over time, these methods are proven to help people get debt under control.
How to Get Out of Debt
“Budgeting has only one rule: do not go over budget.” -Leslie Tayn
Let’s put things in three easy steps, shall we?
Strategize: List out all debts (ALL DEBTS) and go
It’s incredibly hard to chase after goals that aren’t clear or concrete.
The first thing to do is list out all the debts you have. Ideally, find a room with a whiteboard and go to town. This is helpful because you can snap a picture afterward.
When you list it all out, make sure you organize the list from the smallest debt you have to the largest. You will use this list as a reference guide throughout the duration of your debt domination. It might seem discouraging to list it all out at once, but view it as giving your enemy a face — now you know who you’re fighting; now you can go and win the fight. This will help for when you…
Pay: Make minimum payments on large debt first. Then think small.
Again, with your debt listed out for reference, start with those larger payments and the minimum payments you can start putting toward each piece of debt.
“How do you eat an elephant? One bite at a time.”
Now, the smaller pieces of debt that come along — medical bills, short-term bank loans, etc. — are still very important to pay off. But you can eliminate them in one fell swoop through hard work and dedication.
What does that look like exactly?
In today’s gig economy, picking up a “side hustle” or small job on the side is doable and advantageous for your resume/career. It also is a smart strategy to say, “All the money from this side gig will go toward paying off X debt.”
Paying off debt isn’t a cake walk, but the sooner you pay it off, the less guilty you feel eating cake.
Persist: Paying off debt should be consistent … until it’s gone!
Eating an elephant is no small task. But persistence is IMPERATIVE when it comes to eliminating debt.
In addition, while you are on this quest — please don’t get discouraged when other people post pictures or talk about living a debt-free life. Those people crossed their finish line. And good for them! It’s an accomplishment worth celebrating.
But you have YOUR race to run.
And it might take a few extra months or years, but imagine the payoff. That’s what I want for you, your friends and family.
Everyone’s story is different — everyone’s story is important.
We aspire to help you along your path to financial security and that includes sharing information like this that has helped us and others over the years.
Keep hope alive!
Pronto Income Tax Team