Note: this Debt Reduction Plan can be found in our Money Planner on page 16. Learn more about the Money Planner over HERE. and join us Tuesday, February 15th at 7PM Eastern Time for the Money Planner Workshop!
Are you feeling a little down and defeated over all the debts you have incurred over the years? It can happen so quickly, and before you know it you're buried in a mountain of bills wondering how in the world you are gonna get out of it. I know it can feel like you'll be paying those minimum payments forever, but we're going to determine to end that today.
First, know that you are not alone. And you can begin right now to create a debt reduction plan, and begin carving away at your debts. I want to encourage you and let you know that you CAN beat that debt monster with a little bit of planning and a lot of determination. Grab a cup of coffee or diet coke and a pencil, and let's learn how to create a debt reduction plan that works for you so that you can start ditching those debts today.
The first thing you'll want to do is list ALL your debts. Do this on a separate sheet of paper or on a spreadsheet or use the Debt Reduction Template already prepared just for this found in our Money Planner on page 16 over HERE. You'll want to include the name of the debt, beginning balance, and minimum payment. Here are a few examples of the types of debts you should include:
- Auto Loan
- Student Loans
- Credit Cards
- Personal Loans
- Medical Bills
- Home Equity Loans
You can also include your mortgage in this list, but put that one at the very end and save it for last the last thing as it typically is the largest balance and usually also has the lowest interest rate. If you have several debts on your list, I want you to pick the one with the VERY lowest balance and work towards paying that one first as you get started.
Once you have everything listed out, create a Debt Reduction plan that will work for your family! Transfer those debts you listed to your debt reduction plan on page 16 and 17 in the Money Planner in order from smallest to largest. Across the top write out the debt name, balance, and minimum payment. Repeat this process for each debt until you have them all listed out.
The very best part? Starting to pay those debts down!
Determine how much money you can set aside each month to put towards paying additional debt. This might be the hardest part of this whole process. I know sometimes it is even difficult just to get those minimum payments paid. You might have to take a look at your monthly budget to see just where you can cut a few things to put more towards your debt. Think about small areas you can cut that will add up like . . .
- eating out
- coffee at home vs. Starbucks
- ditch cable tv for Netflix
- sell a few things online
- pick up an extra job driving for Instacart or Uber
I promise . . . small sacrifices now can pay off BIG later when you can confidently proclaim that you are debt free.
Continue paying the minimum amount on each of your debts, but put the additional payment towards the smallest one. Eventually you will pay off the smallest debt, then move to the next. Make sure to update the list each month as you pay down your balance on each bill. I know it might seem better to start working on the larger balances first, but trust me, you will feel SO happy to see those smaller debts going away quickly!
What if I have NO extra wiggle room in my budget to pay down my debts?
If you feel like you just can't squeeze out another dime . . . it is okay. (Everyone has to start somewhere!) If that sounds familiar, start right away to transform your finances now. Here are a few posts to get you started:
- How To Save When There's No Money Left
- 3 Tips to Help You Save On Your Grocery Bill
- Biggest Grocery Budget Busters
- 10 Secrets to Saving on Back to School Clothes
- 7 Simple Ways To Save Money On Fuel
- 9 Secrets To Save On Medical Expenses
I hope you are feeling motivated and inspired to get started on your own debt reduction plan. I'll be cheering for you every step of the way as you work towards becoming debt free. You can do this!
New to budgeting and don't know where to start? We're in the middle of our Finance February Money Challenge, and it's a great time to hop on board and transform your finances today!
- Finance February Challenge Information
- Pantry Cooking Challenge (Finance February Challenge) – page 31 in the Money Planner
- How To Calculate Your Net Worth Worksheet (Finance February Challenge) – pages 6 & 7 in the Money Planner
- How To Create a Monthly Budget Spreadsheet Worksheet (Finance February Challenge) – page 33 in the Money Planner
- 5 Easy Ways To Stick To Your Budget (Finance February Challenge) – page 30 in the Money Planner
- Determine Your Financial Dream (Finance February Challenge) – page 4 in the Money Planner
- Create a Bill Payment Schedule (Finance February Challenge) – page 8 in the Money Planner
- Create a Grocery Budget That Actually Works – page 18 in the Money Planner