3 Proven Steps To Debt Freedom

I receive a lot of emails asking me “where do I begin?”, so I decided to write this blog about just that.  One of the most overwhelming feelings for most is in the beginning, when things are not very clear, and you do not know where in the world to start!

You are not alone,  and like MANY others, I have been there too!  There is a reason why it is overwhelming, so I want to discuss some prerequisites before we get started with the 3 Steps To Debt Freedom.

1. Prerequisite #1 – You must STOP BORROWING MONEY! I say this a lot because believe me, this is a BIG problem for most people.  Until you stop adding to your debt tab, you can never really start moving forward, at least not enough to make significant progress, to keep enough motivation to continue.  When you feel like you aren’t going anywhere it is really easy to give up, which in the long run causes your situation to get even worse.  I know you don’t really want that so STOP BORROWING RIGHT NOW!
2. Prerequisite #2 – You must actually DO A BUDGET! To most people this word is very scary, because they think it is a system to keep them from having fun.  To the contrary, it is a system that ALLOWS you to tell your money exactly what to do, no matter what that something is!  The budget is so important because it literally allows you to see with vivid detail, what is actually going on.  It is like looking at your possibilities through a microscope!  When you see clearly, you make better, more informed decisions!  GO DO A BUDGET!
3. Prerequisite # 3 – You must address the behavior that got you where you are today!  You are where you are today because of the decisions you made yesterday.  It’s real easy to blame someone else for your problems, I have done it too!  Many times, and for many years!  The day I discovered personal accountability, I truly became a new man!  In fact, a book I HIGHLY recommend is called QBQ – The question Behind The Question.  We often play the blame game which really gets us nowhere because we never address the problem by doing so.  Instead of asking, WHY did this happen to me, ask yourself, HOW can I resolve the issue on my own?

If you stop borrowing, do a budget, and address your behavior with money, I promise you that you WILL be able to accomplish the three steps below!  It will sound impossibly hard at first, but when you do the above, you will find the money to do what’s below!!

The 3 Steps To Debt Freedom!

When WE started using these steps in hopes of changing our financial position, it excited us!  For the first time ever, we felt in control, and our situation has increasingly improved ever since.  Do not take these steps as an absolute problem free path to debt freedom, but instead look at it as a guide to help you better your position so that one day when life happens, you will be ready to absorb the impact with a plan, instead of with a credit card!

After completing the three prerequisites listed above,it is now time for you to pack up, and prepare for the long, but rewarding hike to the top!  Many have climbed it, many are still climbing, and so now it is time for you to join us on a journey that leads to Debt Freedom and Financial Stability!!

1. Start Saving For Your Baby Emergency Fund – This is a very important step because it allows you to put a cushion between you and life.  We all have emergencies, and the key is to be prepared for those emergencies!  No, not with a credit card like in the past, but with what some would call an old, long lost tradition called SAVINGS!  It may seem prehistoric to you now, but wait until you see how powerful this is.  More importantly, wait until you have an actual emergency and see how great it feels to know your covered.  No more get it now, pay later, that is old news!  SAVE $1,000 as quick as you can, then you can move on to step 2!  I know it sounds hard, but you are more than capable!  Find out How To Give Yourself A Raise!
2. Pay Off Your Debt Using The Debt Snowball Method -  This is controversial to the mathematicians out there, at least the part about how to list your debts.  Dave Ramsey counters them by saying, “If you were doing good math, you would not be in debt in the first place!”  Dave also teaches doing the Debt Snowball as follows.  You list your debts from smallest to largest, except your house, on a sheet of paper regardless of the interest rate. (This is the part that math nerds can’t understand, but there is some psychological reasoning involved.) The reason is because you need some quick wins, and when you start with the smallest, each time you pay one off, you are energized and are ready to knock out the next one!  The term “snowball” comes from the previous amount owed rolling over to then pay off the next debt on the list.  Eventually the debt snowball gets so big that you are able to attack your remaining debt with greater ease!  Try it and see for yourself!
3. Complete Your Emergency Fund – Now it is time to prepare yourself for a bigger thunderstorm!  The $1,000 from step one is mostly to cover the little stuff, and to give you some breathing room to knock out your debt.  Dave Ramsey calls #3 the Fully Funded Emergency Fund, and it consists of saving 3/6 months of your expenses.  With this amount of savings in place, not only will you be able to handle the small stuff, which happens more frequently, but you are now able to handle the big emergencies as well.  (e.g. losing a job, unexpected hospital bills etc.)

Most of my readers already know that I am a huge fan of Dave Ramsey!  Dave changed the way we think about our finances, and in turn changed our financial path in the process.  We started Dave’s Total Money Makeover in January 2008 with about 25,000 in debt.  We now have slightly over $3,000 left to pay!!  Debt Freedom is in range for us and we can taste it!  Don’t you want a bite??  I’m sharing, and there is enough for everybody!!

Do you have any additional questions?  Please address them in the comments section below or you can contact me here!  I hope this helps you find the hope you have been looking for!  Good Luck!

Recommended Reading:

1. The Total Money Makeover – Dave Ramsey
2. QBQ: The Question Behind The Question – John G. Miller