Have you ever felt overwhelmed, discouraged, anxious, defeated, or hopeless because of the amount of debt you currently have?
You are not alone. According to CNBC, the average American has $90,460 in debt.
Having debt is a way of life for many people. People use debt to supplement income, and end up living above their means. This common lifestyle of excessive debt impedes financial freedom.
Debt freedom is an essential part of your journey to attain financial freedom. Unnecessary debt decreases your income and limits your ability to save and invest, and ultimately leaves you bound and unable to choose where and how to apply your money freely.
Imagine your life without student, car or personal loans, credit card, retail card debt, medical bills, etc. What could you do with all this extra money?
You could buy what is necessary, invest for your retirement, save more, and leave an inheritance for your children’s children. However, because of unnecessary debt, a good portion of your hard-earned money is going towards paying interest, thus, increasing the wealth of your creditors and their children’s children.
Here are some things to do to achieve debt freedom:
Make a list of all your debtors with the following information:
- Debt Description
- Total Amount Owed
- Monthly Minimum Payment
- Interest Rate
- Estimated Payoff Date
- Paid in Full
Put in place a moratorium on accumulating debt. Stop borrowing now!
Continue to pay the minimum payment on each debt.
Review your monthly financial plan to identify the extra monies that can go towards your debt. You should only do this if you have already achieved your minimum emergency saving goal.
If you have an emergency, use your emergency fund.
Consider moving high-interest credit cards to zero interest cards.
Consider redistributing money from certain line items in your financial plan to your debt repayment so you can meet your goals faster. For example, instead of an expensive vacation this year, put that money towards your debt repayment.
Go through your house and sell things you no longer need.
Identify ways in which you can make extra income to put towards debt repayment.
Reorder your list of debtors from smallest to largest.
Pay off the smallest amount first. If you get more satisfaction from paying the highest interest rate debts, then pay those first. This is your debt to destroy in whatever manner that is most satisfactory to you.
Get angry with your debtors. They impede your wealth-building goals.
You cannot afford to be bogged down with debt any longer. Approach this step in your journey with a sense of urgency, intense focus and deep fervency. You will be surprised at how much debt you can eliminate if you are intentional and consistent.
Debt freedom is achievable.
Just like establishing an emergency fund, you will find yourself making huge sacrifices. Still, you will eventually realize that debt freedom will open up doors for you to invest in your financial future. Please remember to give yourself grace because this step will take months for many of you.
Debt is a form of bondage. If you are not careful, you will be working for your debtors for an extended period of time. The Bible puts it this way “The rich rules over the poor, and the borrower is a slave to the lender” (Proverbs 22:7 ESV).
If you are on this journey with us and cannot graduate to this next level, do not be discouraged. Understandably, every individual moves at a different pace. Focus on the step that applies to you. Your journey will be more sustainable and attainable if you focus and master one step at a time. What is most important is that you are not sitting still but moving along the journey. Remember, patience is important to achieve financial freedom.
Let us continue our journey.
You have already taken four extraordinary steps towards financial independence:
Step 1: Envision a financial future of freedom by formulating a financial vision and identifying specific financial goals.
Step 2: Assess your current financial situation by tracking your income (what you earn) and expenses (what you spend) each month.
Step 3: Design a financial plan in which you take control of your money and tell every cent where to go each month.
Step 4: Establish an emergency fund by setting aside cash for unexpected expenses.
Do this for next time:
Reflect on this question:
Is your emergency fund enough?