There are a number of ways to get out of debt – perhaps you’re using the debt snowball! Whatever method you use, it’s not going to be effective unless you make one important commitment. The commitment is a surefire way to get out of debt. Can you guess what it is?
No More Debt. Period.
The surefire way to get out of debt is to make a commitment to not go into any more debt. Whoa, simple right? One might assume that this goes without saying. The question is though, do people actually make this commitment?
Why don’t people make this commitment? Many who are in debt feel it is just a part of life sometimes and rely upon credit cards, payday loans, or borrowing from family members. If you feel this way, I want to urge you today to consider better options.
While it can be argued that extreme unforeseen circumstances can lead even the most committed among us to go into debt, I’d counter that the higher the level of commitment the less likely you’re to do so. It’s worth making a commitment! Aim higher than you think you can reach, and you’ll reach higher than you would otherwise.
Think about it. If you commit to not go into any more debt – and don’t even try to pay extra toward your existing debt – eventually you’ll be debt free! Debts do pay off over time with a standard payment plan. Of course, I’d recommend doing more than that, but it’s a start.
3 Ways to Keep Your Debt-free Commitment
Some of these methods you might consider, well, extreme. They have worked so far in my life, however, so I thought I’d pass them along to you. The more of these you accomplish, the more likely you’ll be able to keep your commitment to not incur any more debt. Let’s start with the most controversial of the three.
1. Cut up the credit cards.
If you’re making the commitment to not go into any more debt, then why would you need credit cards? Who needs a FICO score when you’re not going to borrow anymore? Even if you plan on getting a mortgage in the future, you should be able to find a mortgage company that will lend to people with no credit score.
I recognize that there are some benefits to having credit cards (such as slightly lower insurance rates) and rewards programs, but if you tend to amass a lot of credit card debt, it might be time to get rid of the cards.
One great alternative to the credit card is a cash back debit card from PerkStreet Financial. My wife and I make hundreds of dollars in cash back every year on our everyday purchases!
2. Organize your financial house.
Sometimes people go into debt because their finances are simply disorganized. If this sounds like you, make sure you know how to make a budget and actually do it! This is a critical step to make sure you are spending less than you make. And by the way, if you don’t know what budget categories to start with, try my Budget Category Brainstormer – a printable worksheet with over 80 categories and plenty of spaces for you to brainstorm your own!
Another area you might struggle with is paying your bills on time. Oftentimes, there are just too many due dates to keep track of and passwords to online accounts to remember. You might want to give Manilla a try, it’s a free online account and bill organizer. There’s even an app for your iPhone that can send you notifications of upcoming bills!
3. Bulk up your emergency fund.
One of the best things we’ve done for our finances was to build an emergency fund. We earn a bit of interest off of the account (ING Direct) and never have to worry about financial emergencies. It’s saved us a lot of stress and anxiety, that’s for sure! Wherever you save your money, do so in an account you can nickname “Emergency Fund” and only use those funds for true emergencies!
As you build your emergency fund, you’ll find that you’ll feel less of a need for credit cards – or loans in general! You’ll be in control by lending yourself money out of the emergency fund. No more paying high interest to the banks!
Are You Ready to Commit?
If you’re fed up with your debt, it’s time to get serious and make the commitment to never go into debt again. Perhaps you’re not ready to make the commitment to not get a mortgage, and that’s okay. All other debt though – do you really need it?
Can you work through college instead of taking out student loans? Can you save up money for your new car purchase instead of leasing or borrowing? Can you use an emergency fund when times get tough instead of credit cards?
If you’re ready, make your commitment in the comments. Hold to your commitment, and you’ll discover it truly is a surefire way to get out of debt. Not ready? Tell us why in the comments. Questions? We’re open to those too.