When many people decide they want to become financially independent they start their own debt free journey. With the average American having over $90,000 in debt, getting your finances on track may prove no easy feat. However, through careful planning and tracking you too can pay off your debt and start your financial life fresh.
Debt can come in many forms, including credit card debt, student loans, car payments, medical expenses, mortgage loans… etc. No matter the starting debt number, getting started is the first step. Read below to find out why you should start your debt free journey, what you can expect, and how to get started.
Why you should start your debt free journey?
Setting up a plan to become debt free is one of the best things you can do for your financial journey. Being debt free is one of the most freeing feelings you can have and it can open up many doors in your life. Below are just a few of the key reasons why you should start your own debt free journey today.
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You’ll learn what matters most to you
One thing you’ll find on your debt free journey is you may have to start analyzing the purchases you’re making. Saving money means putting limits on the things you may be used to buying. This is one of the reasons why it’s important to set a goal when beginning your debt free journey. By setting financial goals and limits, you’ll find yourself having more clarity in how and where you spend your money.
This exercise can help you figure out what’s important to you. Suddenly when having to face the decision between buying ice cream out with your family on a Saturday vs. purchasing the latest video game that’s come out, you may find that certain purchases outrank other. These shifts in mindset will stick with you on your journey through and beyond being debt free.
See related: 7 Questions to Ask Yourself Before Buying Something
It’ll change your perspective on how to live your life
We live in a society that’s ultra focused on shopping. Everywhere you look there’s an ad for something. It’s easy to fall into the trap of buying more things than you need because you feel like you need to keep up with everyone else.
Part of going on a debt free journey is tracking your spending. Every purchase becomes an item that keeps you from achieving your goals. This can shift your perspective on your daily spending (for the better!). You should be analyzing each and every purchase that isn’t a necessity. This will get easier over time as you track your progress.
You’ll feel more financially confident and be able to go after bigger dreams
As you see your debt begin to decrease, you’ll find that you feel more confident in your financial future. Being debt free will allow you to achieve bigger dreams that require having a certain amount of financial security. This can include being able to get a job that fits more with your lifestyle, starting your own business, or taking more time to spend with your family.
Debt can hold you back from reaching these goals, but once you’re no longer drowning in payments it becomes easier to focus on the things that matter most to you.
What to expect on your debt free journey?
Starting your debt free journey won’t necessarily be easy, otherwise everyone would be doing it. But with focus and clear expectations you can help set your self up for success. So what should you expect?
You may question your abilities to achieve a debt free life
Whether you have a small amount of debt hanging over your head or feel like you’re drowning, the task of completely eliminating debt can seem daunting. You may question if you can achieve the results you’re seeking.
The best way to combat these insecurities is to come up with a plan. How can you make changes to your current spending habits? Are there certain items you can get rid of immediately to help you pay down your debt faster and more efficiently. Even the smallest changes can add up over time and help you achieve success. Lay out a plan that lets you slowly (or quickly) start chipping away at your debt and stick with it. Every little contribution helps and by tracking your progress you’ll be able to recognize your accomplishments. Celebrate the small milestones and keep focused on your goal.
You may find you regret a lot of purchases you used to make
Once you start analyzing everything you purchase, you may find that you regret a lot of your past purchases. You’ll start to notice that you’re buying more things than you need and it may make you feel guilty or overwhelmed when having to pay for things.
This is the point where most people will want to give up. The key here is recognizing that this is not an endless cycle. Once you begin to be mindful of what you are purchasing, you are making changes. You don’t have to give up on your goals because by noticing the problem you’re already taking steps towards correcting it.
Bonus step: if you find that you have items you’ve bought before your debt free journey that you no longer want or need? Try selling these items to accumulate extra cash towards your debt! You can host a garage sell or sell things online through sites like Ebay or Poshmark.
You’ll become more disciplined
In order to become debt free, you’ve got to have discipline. You need to keep a clear mindset of your end goal and how you can get there. Using financial tools like setting up a budget or becoming a pro at finding deals will teach you to be more mindful in your every day life.
These new found skills will spill over into every area of your life. You’ll most likely notice a change in your work ethic and overall productivity. This can make you more disciplined in everything from meeting deadlines at work to completing household chores quickly and efficiently.
How to start your debt free journey
Convinced that starting a debt free journey is right for you? Let’s take a look at how to get started.
Assess your finances
The first step is to assess your finances. You need to know what you owe (and to who) in order to start your debt free journey. If you haven’t already, take a look at your credit report. This will let you know where you stand with lenders and collectors, which helps when it comes time to negotiate debt settlement or make debt repayment plans.
Figure out how much you need to live and start a budget
Now that you know your debts, you can start determining how much it will cost for you to live each month. Begin by creating a budget and spending plan. It doesn’t have to be complicated but should be based off of what you need as opposed to want. This includes living expenses like rent/mortgage, food, insurance, etc. This can be a great opportunity to start cutting out unnecessary items from your life that you don’t need or use.
See related: Budgeting Tips for Beginners
Develop a debt repayment plan
Once you have outlined each of your debts and their respective balances, it’s time to create a repayment plan for them. Here is where you begin negotiating with lenders as well as paying off your debts. You can use help from a debt relief company or try negotiating the interest rates and monthly payments with your creditors directly. The key is to find what works best for you in order to keep costs low while still reaching your goals.
Use the budget you’ve created to track how much money you should be able to put towards your debt each month.
Set clear goals
Having financial goals is essential. They act as milestones that you can use to mark your progress and keep your momentum going. You’ll want to set goals for paying off debt, saving, investing, etc.
Start with your high level goals. How quickly do you want to pay off your debt? How much money will you have to put towards that goal every month to achieve it? Is that possible? If not, figure out how you can adjust your budget or adjust your goal.
Set up goals that you want to achieve after you’ve paid down your debt. Envisioning what you will be able to achieve once debt is no longer in the picture can be a great motivator for keeping you on your journey.
See related: 7 Smart Financial Goals to Grow Your Wealth
Begin tracking your progress
It is very important to track your progress as you continue to chip away at your debt. This helps build momentum, which is important in completing any goal.
You can track your progress by keeping a spreadsheet of all the debts you’re paying off and their updated balances. Make sure you’re tracking your budget as this will be critical to your journey.
Celebrate the milestones big and small and remember becoming debt free is a journey and there will be highs and lows throughout.
Get started on your debt free journey!
The journey towards becoming financially free can be difficult but it’s one that will pay off in the long run. It isn’t impossible, though. The most important thing you need in order to start your debt free journey is a change in mindset. Develop the right mindset and you’ll be well on your way to financial freedom.
Want help tracking your budget? Check out the Clever Fox Budget Planner.