There is only one way that we could have the goal to live on half of my husband’s salary, and that is to be debt free. I know this is a frequent topic on the site, but I cannot stress how important debt free living is to reaching your financial goals.
note: When I write about debt I am not talking about a mortgage, although I think it is awesome if you can pay cash for your home, and I personally know people who have, I realize this is not a realistic goal for everyone.
How to Dump the Debt
Hate Debt – If you view debt as a tool, or something that can be useful it will be very hard to rid it from your life. If you hate it, you will be less tempted to find reason to acquire debt. Example; for years I thought credit card debt was bad, but car loans and student loans were tools. This mentality caused us to purchase cars that were above our means and take out way to many student loans. Now that I hate debt, but need a bigger vehicle my incentive to save is huge. We need a different vehicle in two months, so I better get serious about saving or someone will be riding on the roof. Debt is only a tool for the lender, a tool to get rich off of you.
Put it on Paper- Why do so many people refuse to open credit card bills or tally up their debt total? It is overwhelming, but ignoring it is not the answer. Debt will not magically disappear if you refuse to answer the phone or open your mail. Make a list of all your debt. My recommendation is to use Dave Ramsey’s debt snowball plan of writing it down from smallest to largest, do it however you want as long as you do it.
Figure out your Income- For some people (like those of us in the military) this is simple. For others with variable incomes add up your income from the past year and divide by twelve. That should give you an average of what you make each month.
Write a Budget- I highly recommend downloading some sort of budget form for this. You can make one yourself, but with so many free downloads on the web why bother. When writing out your budget make sure all the necessities are covered first; food, shelter, utilities, transportation, and clothing (essentials only). Figure out what you have left over and create a plan to apply it to your debt.
The Tricky Part– This is where the rubber meets the road, for some of you there might not be money left over, or at least not enough to cover all your debt. You have an income problem. In order to solve this problem you must create more income or lower the cost of your necessities. A house is an necessity, a 3000 square foot house is not. Transportation is a necessity, 2 brand new cars with huge payments are not. Food is a necessity, but if you spend any amount of time on the internet you know there are people who feed their family of 10 for $300 a month. Okay, I am exaggerating slightly, but food is an easy category to trim. Clothing, definite necessity, new clothes from the mall, not so much.
If your necessities are already trimmed to the max it is probably time to consider getting a second job. I know the economy stinks, but many places are still hiring part time workers. Remember delivering pizzas isn’t glamorous but neither is filing for bankruptcy. This is a temporary situation until you are able to get on top of the mountain of debt.
At this point you should have some extra money to attack your debt. If you are serious about hating debt you will have no problem putting every nickel and dime towards debt reduction. The more you desire to change your situation, the easier it will be to make lifestyle changes that can help you reach those goals.
Remember cutting cable, eating beans and rice, owning one car might be temporary until you are able to make a dent in your debt. If you choose to keep your current lifestyle (usually the one that got you in the situation in the first place) it will take you a long time to become debt free.
For our family drastic short term changes were enough to rid ourselves of debt. The funny thing is that once we had no debt, we had no desire to spend either. It wasn’t as if the day we sent out last payment to Sallie Mae we went out and celebrated with a steak dinner.
Thrifty living was a short term goal that, for us, ended up as a lifestyle change.