- 3 Steps to Paying Off Debt
Manage and eliminate your debt the smart way.
September 23, 2016
By: John B. Etrheim
Stop singing “I owe my soul to….(insert your credit card here)"
The lyrics to Tennessee Ernie Fords’ song ‘Sixteen Tons’ goes like this: “You load sixteen tons, what do you get? Another day older and deeper in debt, Saint Peter don't you call me 'cause I can't go, I owe my soul to the company store.”
Do you feel like that?
Feeling like your paycheck is spent before it even gets into your account?
You’re not alone as debt not managed properly can overwhelm you and make you feel “another day older and deeper in debt.”
Here are three steps to change your tune.
Step #1: Seeing is Believing
Write everything down:
- how much you owe
- your monthly payment
- the interest rate and the term of the debts.
Next, add all of your monthly expenses – don’t leave out that can of pop or the time you drove through the fast food for a burger and fries.
Be honest and track ALL of your spending. Seeing where you are spending your money will be an eye opener. This will not be a fun process, but definitely the starting point to believing you have to make a change.
Step #2: Finding a Better Way
Reviewing your spending habits will reveal areas you could probably cut from your spending plan.
Remember, this will not be easy at first, but the results will be worth it.
For example: If you eat out for lunch each day and it costs you an average of $5 per meal, by bringing a lunch from home, you could save up to $100/month.
This is a ‘Better Way’ of doing the same thing. Where else can you find areas to cut spending?
How about bringing a water bottle from home and drink water during the day instead of buying a soda from the vending machine? Saving a $1 here and a $1 there can really add up over the month.
Apply this extra savings to your debt payments and you are on your way to a better way!
Step #3: Snowball
From your list of debts that you wrote down, focus in on the one you want to payoff first and commit to it.
Starting with the smallest one and applying extra payments each month is a great way to start and you will also see some success sooner.
As one gets paid off, snowball that payment towards the next. When that one is done, snowball that payment on to the next and so on.
By the time you get to your last debt, your payments will be much larger than the minimum payment and you will soon realize your financial freedom and not far away.
Remember, the snowball approach only works is you avoid gaining more debt during your plan.
These are three easy steps to get you started. Still need help? Great Western Bank is here to help. Contact us.
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