Money Management: How To Get Out Of Debt

Money is a great tool to have and enjoy. The problem is that money management is not something we were ever taught. The only thing my Mom taught me about money was that we couldn’t afford luxuries. She would always say, “I don’t have money for that.” “That’s too expensive”

Money Mindset

I grew up wanting to experience the “luxuries” that I never got to experience at home. I worked really hard to live a different lifestyle but I ended up spiraling out of control after a very painful brake-up. Shopping always brought me happiness, at least momentarily so I ended up spending way more than I was making. At the end, I ended up with a huge debt plus my student loans on top of that. Seeing all the bills just piling up stressed me out and I honestly, didn’t know what to do.

I finally had the courage to go through my finances and come up with a plan to get out of debt.

Going through my finances and coming up with a repayment plan wasn’t easy, but I finally felt in control again. Dave Ramsey was one of the people I turned to for financial advice and money management. A simple plan is all you need when you are drowning in debt. I’m almost done with my debt. I can see the finish line and I can’t wait to have that behind me.

If you are stuck in a pile of debt, know that as much as you don’t want to face it, you will have to at some point. If you are ready to tackle your debt and start getting serious with your money management, use this plan to get out of debt.

Money Management – Get Out Of Debt Plan:

Face Your Debt

If you are serious about getting out of debt, you have to figure out exactly how much you owe. Call your credit cards, look up balances online or, call your bank. List all the debt you have one by one on a spreadsheet or piece of paper. Write the balance and interest rate on each debt. This will include all consumer debt, student loan and car loan. Do not leave anything out because what’s the point of doing all this if you are not going to face it all.

Call Your Bank

Start calling everyone you owe to see if they can lower the interest on the debt you have with them. If you have good credit, see if the bank can make you a personal loan. It has to be big enough so you can dump all the debt you have into one place. This makes it easier for you so you have one payment to make each month instead of multiple payments on different days. Personal loans also have a lower interest rate than credit cards do. You can also call your bank every 6 months to lower the interest rate on your personal loan.

If you can’t get a loan, you are going to have to keep track of all the payments you need to make. Figure out what best works for you in terms of payments. List out the dates they need to be paid, amounts and which debt you want to focus first. You can tackle the smaller debt first and then once it’s paid off, you use that money to pay off the next one. You keep repeating this method until you are done paying everything. The other method is paying the debt with the highest interest first so you get rid of that one and pay less interest in the future.  Whatever method you use, just make sure it will be something that will work for you and you can stick with it.

Money Management 101: Create a Budget

I know, I hate the word budget too. But it’s essential that you come up with a spending plan because you will be back in this hole if you don’t. Don’t think of a budget as a way of restricting yourself but as a way of allowing you to spend your money the way you want to. Make sure that your budget is also realistic because you don’t want to end up eating rice & beans for a whole year. That’s not fun and you will go back to your old habits if you restrict yourself too much.

Go through everything that you spend your money in and ask yourself if you can spend less on those things or, if you could do without them. For example, instead of going shopping every weekend like I did, you can go shopping every 3 months. Just make sure you have a specific amount you want to spend. Your budget should include your debt repayment as well because it’s part of your spending plan. You need to know where your money is going each month.

Start Saving

It doesn’t matter how much you are able to save at this point, but you have to get in the habit of saving. You probably won’t have much left over but, you have to get learn to save to be good at managing your money. If you can’t even save $20 a month today, what makes you think you will be able to save later? Saving is a habit and you have to start now, not tomorrow, NOW. Make sure that you pay yourself first so you don’t end up at the end of the month with nothing in your savings account.

This will also serve as a cushion for you in case you have an emergency and need to pay for something unexpected. Trust me, I’ve fallen out of the wagon before because of this very issue. I didn’t have an emergency account and I ended up using money I didn’t have to pay for an unexpected expense. Make sure you start saving as soon as you can so you have something to fall back on.

I would love to hear from you. Do you have a plan to get out of debt? Did this article help clarify anything for you? Let me know in the comments below.