I know the reasons why I fell into poor financial health. I know how I got here. Now I need to develop an action plan to rid me of bad debt and bring me back to financial health. The treatment needs to be aggressive yet bearable. I want to liberate myself as soon as possible. I don’t want to push so hard that I overwhelm myself and quit. My goal this year is to eliminate at least $10,000 in debt this year. The process is simple. However, it requires patience, diligence, and effort.
- Reducing Expenses frees money to be used to pay down my debt.
- Becoming Frugal- Frugality is the art of spending efficiently and effectively, not being wasteful, and living simply while living well. I decided to cut out the non-essentials and find better prices for the things I need.
- Prioritizing Purchases- Becoming financially independent is an ultra marathon. I can’t buy whatever I want whenever I want. I have to decide what is most important to live my life. The money that I saved by putting a purchase off can be used towards getting rid of my debt. It’s a frustrating thing but it’s something I need to do.
- Eliminating Excess Fees- I dislike fees that can be avoided. It’s the little things that count. The best way to eliminate them is by paying everything on time and finding alternate products that provides the same benefit with less fees.
- Negotiating Lower Prices- Things in life are negotiable. If you know your price and their prices, you might be able to save yourself a few dollars.
- Modified Debt Snowball- David Ramsey popularized the debt snowball as a way to eliminate debt by paying off the smallest loan first to gain momentum. It has great psychological value by providing a sense of accomplishment. Instead of tackling the smallest loan first, I created milestone and focus on eliminating the highest interest rate loans first. It is the highest rate loans that takes the most money away from us. I celebrate when I hit my milestone. My milestone for 2010 is reducing my credit card debt by $10,000.
- Increasing income brings more money in to pay down the debt.
- Finding Another Job – The added income helps pay off the principle faster which saves money in lose in income.
- Selling Off Possessions – Is there anything I haven’t used in awhile or something that I can let go of? The things that pulled us into debt can help us get out of debt if we sell those goods.
- Odds and Ends- There are other miscellaneous things you can (legally) do on the side to earn you money.
- Developing Healthy Habits. Snubbing my unhealthy habits and replacing them with good ones will keep me on track.
- Planning and Budgeting
- Emergency Fund Investing
- Passive Income – Saving and Investing
Between now and December, I will be working diligently on getting my financial life back on track. This is the year that I begin training for a great life. It begins with a baby step today.
