Disclaimer* I first want to express that I am not a financial advisor and any of the information below is my experience and not the opinions of any affiliates.
A seminar for making money and getting out of debt I once attended forced me to acknowledge what kind of “person” I was when it came to money.
To make a long experience short, I was an “avoider.” Yes, that was me. I’m sure many can agree–growing up, my money mindset was skewed and somewhat negative, so at times I purposely kept myself in the proverbial dark, avoiding credit scores, delaying bill payments or paying off the minimum. To make matters worse, I continued to borrow, leaving me in a financial sinkhole.
It can be so much easier not to confront, hence “avoid” the inevitable fact that you owe money but there are two things that happen when you do this.
- You get older but less responsible, distancing yourself from creating any kind of business or comfortable life for the future
- Decreases your financial IQ or positive outlook on life
There’s a lot that comes with having debt. Guilt, shame. Overwhelm, where you’re always carrying a burden. Here’s the raw deal.
If you’re an entrepreneur like myself and are serious about creating and building a business you love and owning the life you want, then you need to own your finances first. A successful business model rests on a solid and sound financial foundation. That foundation is you.
Getting into the Mind of an Entrepreneur
With considerable study, I eventually managed to become pretty savvy with the spending part. I sold most of my belongings, traveled the world and made quite a bit more than usual. However, nothing could possibly get better until I took hold of my finances. I could no longer keep debt around and knew it would swallow me whole if I didn’t take charge.
It wasn’t until I saw a commercial for Credit Karma (if you’re in Canada Borrowell is equally as awesome) who allow you to check your credit score for free without taking a hit to your credit. It finally became too easy and the excuses had to be ditched.
I signed up and checked my score. It made me feel horrible. But seeing that number motivated me to finally take charge.
When I went searching for a step by step guide to get out of debt, I mostly came across articles written to give you a general sense of how to get into the habit or mindset that will prepare you to get out of debt. True, mindset is eighty percent of the battle. Yet, I had already cultivated that. I wanted the thing that would give me a more systematic approach.
It’s a given that all situations are different, but this article isn’t just ideas, but an effective guide to PAY OFF your debt and keep you there.
The very first thing you should do is clean up and improve your credit with the credit bureaus. Call both Transunion and Equifax and find out if there are any outstanding payments or discrepancies on your file. If there are, you will have to file a dispute. It’s important to sort these out first to protect yourself against identity theft as well as better position you to face your debts.
When I checked both Transunion and Equifax, I discovered credit accounts that were still open since 2005! You don’t want this. You will come to see how important these things are when it comes to keeping your name clean.
Again, deal with this first!
How To Get Out of Debt–Even If It’s Old Debt
We’re going ham on this so get yourself prepared. Meaning, it’s going to be short and sweet but effective. We’re not doing any minimum payments, no automatic withdrawals and certainly no financial advisors. The point is to force yourself to face what you’ve essentially created. To get you into the habit of being responsible, conscious and aware by doing things manually, which in turn will naturally elevate your financial IQ and your lifestyle. Oh, and just wait, I have a few things that will catapult you and keep the momentum alive forever.
You may see this as an oversimplified process. Yet, my goal is to not only pay the information forward but also not complicate it with numbers, broad or specific terms like debt to income ratio, or leave anyone in an analysis paralysis rabbit hole.
What I am about to show you is the easy part. The hard part is actually facing your debt and making the commitment to pay them off once and for all.
Your Simple Step-by-Step Plan
This is a bonafide, tested and proven way to pay off your debt in no time!
- Stop spending and decide to keep only one credit card. Until you become more serious about paying them, you technically only deserve to have one (or none)
- Lessen or remove expenses that are costing you more than what you can afford
- Check your score for free with either Credit Karma or Borrowell
- Contact BOTH Transunion and Equifax to make sure your account is clear of all debts and discrepancies. Open disputes where necessary
- In a Google Doc or notepad, list and calculate your debts from smallest to biggest – Generate total
- List and calculate separately your expenses from most important to least – Generate total
- Determine your monthly or bi-weekly income
- Subtract your expenses from your monthly income
- Now with that amount take/subtract $400 biweekly (minimum)
- If you find you don’t have $400, then start with at least $350. Anything below that will prolong your efforts. This is where you reduce your expenses to make this happen
- Commit to this and don’t skip a beat
- Take what is left and allocate 10% into a savings account
- The rest is yours to spend. The idea is to never spend more than this. If there are things you have to pay for, then you need to start removing them from your lifestyle and start living ‘within’ your means. Not outside of them.
Steps 5-9 are the 5 actionable steps that will clear your debt. Everything else is what will help you do that.
Once EVERYTHING is paid off, you won’t believe the feeling that comes over you. That true sense of freedom and empowerment is something you learned to do and nothing or no one can take that away from you.
If you want to be debt-free and live better, then your goal is to start budgeting properly, saving, but more importantly to make more money.
Budgeting can be boring. CLEO isn’t. She’ll catapult your finances into budgeting bliss. Don’t be rude. Say hi, at least. You won’t regret it.
Get out the mindset that loans will save you and stop borrowing money to pay for your life. Either make more money or don’t spend it.
Lastly, get rid of all your credit cards and keep just one. Keep the best one. Then sign up for a prepaid credit card or acquire a digital bank account. As a full-time entrepreneur and traveler, having these accounts and credit cards literally saved my life.
Check them out and see which ones are best. I have accounts with all three.
Once you have accomplished this, then it’s time to take your business ventures seriously.
What have been your struggles? Let us know in the comments.
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