Inside this edition: Are four steps to help you to start reducing your debt.

Hey y’all it’s your girl Rainey hanging in there with YOU – my tribe – the Rainey Crew during these uncertain times. You know if it were really that easy to reduce your debt in four easy steps no one would be in debt.  This is a guide to get you to get you on your way to reducing your debt.  As most individuals do, we struggle between wants and needs.  When we cannot recognize the difference that is when we find ourselves drowning and reaching for the credit card to save us.  I like many of you have been there.  Bills to pay, car note, and yet you want spend by dining out or buying things you really cannot afford.  This brings us to the first step to reducing your debt.

Admit you have a problem with your Debt

This is probably the hardest step of the four steps.  If you are strong enough to simply admit you have a problem, and move to the next step you are one of the lucky ones.  What we find is that debt is not something we get into by ourselves.  We get into debt because we are spending usually to impress others.  Friends and relatives intentionally or not have the power to dictate our spending.  You have to take that power back and not be controlled by peer pressure. 

Admitting you have a problem to your friends or your spouse is saying to them that you don’t want to hide behind a façade of not being accepted.  In this step you may also see who your true friends are, and if they are willing to help you get on track.  You may also find that the people that reach out to you will be either ready to help with the offer of advice, or they may also be swimming in the same swill of debt.  You are never alone.

Stop Spending

Easier said than done you say.  Sometimes I compare spending to drug abuse.  The hard part is saying no.  Mentally challenging yourself and owning your problem is so difficult.  I know because I have been there.  Credit cards are like a double-edged sword in our society.  They are a great way to build up our credit history, and at the same time they can bring us down if not used carefully. 

The best way to get control of credit card spending is to either cut them up or leave them at home in a drawer.  Remove them from ApplePay, GooglePay, and any other apps that allow you to pay virtually.  You cannot spend what is not available to you.  Pay for purchases with cash, debit cards or checks – yes people still use checks.  This will push you in the direction to make planned purchases only.  Having access to credit is posing the greatest threat to getting your debt under control. 

Make a Spending Plan

Now you have stopped using your credit cards, and you are spending only what you have in the bank or your pocket.  It is time to sit down and truly understand what you are spending daily and monthly.  Get a sheet of paper and write down how much you make a month and calculate how much you made last year.  Now think about things like your rent/mortgage, utilities, and car payment, and write them down.  If all is right with the world the latter should be less than what you made and the rest should have been saved.  Right?  In a perfect world this is what should happen.  What actually happens are dining out with friends multiple times a week, birthday gifts, holiday spending or unexpected repairs.  These are the items that frequently send us spiraling into debt.

              Take control

Here is another task that many will find difficult, but oh what an awakening.  Get a small notebook or another clean sheet of paper and track your cash spending.  You can go big and try it for a week or baby steps and try it for a day.  You can use my Daily Expense Tracker freebie to help get you started. When I did this I saved every receipt from every transaction I made no matter how small.  If you can’t get a receipt make a note.  At the end of the day I could fill out my notebook using my receipts.  When you get a visual of how much money you spend daily it hits you a punch in the gut.  You are automatically going to start questioning your choices.

Remember, you are only tracking your cash, debit and check purchases because you are no longer using credit cards.  Let’s amp it up!  Track your spending for a month with Week 1 starting on the 1st and ending on the 7th, Week 2 starting on the 8th ending on the 14th and so forth.  At the end of the month you are going to take the totals to help you create a budget or better yet a spending plan.  The plan is to help you gain control over your spending.  To do that you have to see where the money is actually going, and to take control. 

              Trim your spending

Remember earlier when I said getting the visual of how much you spend vs. how much you make hits you like a punch in the gut.  If you are being honest with this process it will.  It will hurt a lot more when you have to cut back on all those wants that have put you in this situation.  You can start with small changes.  This means cutting back on things like eating out, entertainment, grocery shopping, transportation, clothing, household changes, health, hobbies and vices.  Check out my post on how to trim your spending.

Pay down your debt | One by One

So you have hidden the credit cards, created a spending plan, and trimmed your spending to find extra cash.  Now what do you do with that newly found money.  An obvious answer is to save it, but alas that is the wrong answer.  To make sure that you do save money you should save at least 10% of your income through an automatic deduction to a savings account.  Why automatic?  You cannot spend what you cannot see.  This is going to be your emergency fund that you are going to be building up to $3000.00.   Remember, you are in debt.  The money that you have found due to trimmed spending is going toward your debt reduction.  Get ready to pay your debts.

  • Identify your creditors.  Make a list of Credit Card, the balance due, Interest Rate, the Minimum Payment.  If you are ready to get started use this simple Debt Tracker freebie I created.
  • Based on the interest rate. Pay off the debt with the highest interest rate first.  This does not mean that you don’t pay the others just make the minimum payment on those.
  • The money you identified from the spending plan can be added to the minimum payment.  If you were paying $100.00 before monthly, and you have now an extra $50 per month you will now be paying $150.00 per month.
  • After you hit the $3000 mark on your emergency fund stop, and take that 10% you were saving and apply it to paying off the debt.  Once all debts are paid resume saving and start investing.

Is it that Simple?

Yes, it is that simple, but it is hard work staying the course.  It is hard because the results are not immediate.  It takes time to see the numbers go down.  It takes time to make the money, but it is so rewarding when that zero balance comes through.  It is like a psychological weight being lifted off your shoulders, and it feels so good.  Once you stick to the process it is with you for life.  You will think differently about spending, and the value of the things you spend your money on.  You can do it!  Take control and the first step to getting yourself out of debt.

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