How To Break the Chains of Debt

Below are two different sections. The first section discusses some tips of how to save money, and the second section discusses how to more quickly eliminate your debt. At the bottom are some great books you can get at your public library to help gain financial knowledge to be able to conquer anything! Get ready to see the extra change start adding up!

  • Stop watching TV – A Neilson survey states that the average American spends an around 5 hours a day watching television. If you spent that 5 hours a day actually working on something that makes you money like a small online business, you could find yourself out of debt quickly. Imagine if you made $5 an hour profit instead of watching television. You could make an extra $7,756 a year after you pay 15% in taxes! Your cable bill usually tacks on an extra $60 per month to your overhead. Eliminate this and you’ll save $720 a year. If you purchase a $1000 television every 5 years, you’ll also save an additional $200 per year! Just by doing this step, you could pay off $26,000 of your debt in just 3 years! If you lost even simple subscriptions like Netflix or Hulu, you can easily save $100 a year.
  • Eliminate Fast Food – The Dollar menu at McDonald’s doesn’t have as many pros as you think financially. Let’s say you actually want to feel full upon finishing your meal. You order 2 McDoubles, a Fry and a Large Sweet Tea. In Florida, you’re at $4.27 and for two people that’s $8.54. Not only did your medical bills over the period of your lifetime increase by a few dollars, but $8.54 for two meals?!? Wake up America! This is expensive! You can cook a huge meal for two at home for $5 and have leftovers, if you just get a little creative. That’s $2.50 per person. Now I’m lovin’ that!
  • Eat More Fiber – It’s not that fiber makes you lose weight, it’s that fiber makes you feel full. If you feel full, you’ll eat less, and as a result, you’ll spend less on food. If you ate two meals per day instead of three, you’ll eliminate 4 months of your food bill. If you spend $300 a month on your food bill, you just saved $1,200!
  • Shop for your main groceries only once a month! – Not too many people like this because two things must be taken into consideration. First, you may miss certain sales that happen at your store regularly, and second, your perishables go bad before then. Since this is the case, we have specific items we will return to the store to check and see if they are available. We only buy those specific items. We also return mid-month to pick up any eggs, milk, or fruit that perished since our last shopping trip. By doing this, we eliminate countless spontaneous decisions. If you shop weekly and make $12 in spontaneous purchases, this adds up to $624 a year. If you shop only once a month and still make $12 in spontaneous purchases, you’ll still save $480. It pays off in the long run.
  • Don’t buy something if you can live without it! – You are in debt. 100 years ago, if you were in debt, people would avoid you because of the awful “crime” that you had committed. You would be treated like a cancer because of your overzealous, selfish spending habits. Ask yourself with each purchase, “Can I live without this item. If I hadn’t seen it, would I even care about it?”
  • Wear glasses full time instead of contacts. – Contacts cost money. Most people have glasses and contacts. Lose the contacts. It’ll save you easily $300 a year if you have an annual checkup to renew your contacts prescription. You can avoid the checkup if your glasses work fine.
  • Turn off the things you don’t use! – Turn off your water while brushing your teeth and washing your face. Turn off the lights when you’re not in the room. Turn off the TV (if you still have one now) when you’re not watching! You can even unplug items that run electricity even when they are off! You’d be surprised how much money you can save when these daily cents turn into monthly dollars! How cold is your freezer and refrigerator? Make sure to keep it on the average temperature. You’ll still live if your stuff isn’t 3 or 4 degrees cooler.
  • Close your blinds and turn off your A/C during summer days when you are not home. – Since we live in Florida, we can use our A/C almost year round for the exception of the deep winter months. In the summer when it’s humid and 95 degrees, our A/C could literally run every 5-10 minutes to keep the temperature in the mid-70s. If you can program your A/C and you have a regular schedule, set the A/C for 85 and have it set to cool down 30 minutes before you get home. That way the temperature isn’t unbearable when you walk in the door. If you’re gone from home to drive an hour to work, an hour home, and you work a 8 hour shift plus a 1-hour lunch, you could eliminate about 40% of your A/C bill!
  • Make your coffee at home. – Yeah, yeah, yeah, you’re sick of hearing it. The car salesman told you to do that so you’d buy the leather interior, didn’t he? Well the truth is even if you buy a house coffee for $2.00 three times a week, you’ll spend over $300 a year. If you go through the drive thru, your gas bill will increase that amount by much more! A large tub of Folgers in Florida costs about $13.00. Even if you bought one once a month along with $5.00 in creamer, you could have coffee every day and still save $100.
  • Maintain your car. – The oil change and tire rotation can add up to about $20 a month, but by staying in tune with your car’s tune ups, you can prevent a long-term problem that could result in thousands saved if there is a major problem occurring!
  • Drive the speed limit! – Speed limits suck, we know. They’re about as bad as red lights. The truth holds, however, that when you drive the speed limit your gas mileage will increase drastically compared that to a driver who drives 10+ mph over the speed limit. Even if you save 3mpg per fill-up and you drive 12,000 miles per year, at $3.60 a gallon of gas (which is average in Florida), you’ll save $130 a year. That’s a good chunk of a car payment!
  • Pay your car payment in twos. – Not many people know about this one, and not all banks or credit unions let you do it. We talked with our credit union and they told us that we would save the equivalent of 3 months of car payments by paying half of our payment at the beginning of the month and half of our payment at the end of the month. Why? The interest that you would accrue during the month is half of what that’s month’s interest would normally add up to because you paid the first half earlier. Now instead of 60 months, we’ll pay off our car in 57. But wait there’s more…
  • Round your car payment up! – Our car payment is a modest $252.00 a month. By paying $260.00 a month instead over the period of 60 months, we’ll eliminate two car payments. The first month is paid by overpaying and the second month is paid off by the mixture of overpaying and destroying some of the interest. Between overpaying and paying our car payment in twos, we will eliminate around 5 months of our car bill and most of the interest. 5 months @ $252.00 per month is $1260.00. That’s $252.00 a year in savings! Now I feel like I walked away with a good deal on my car!

Now let’s talk about the not-so-fun stuff: Discipline. We don’t all go into debt due to our lack of disciplined spending habits, but many of us are still dealt the debt card. Here are some ways to get out of it quicker. At the end, we will give you a list of some reading material that can help you, pump you up, and help give you some financial intelligence and independence.

  • Create a debt chart. First you need to find out what the actual dollar and cent amount is of the debt that you owe for each card or loan that you still need to pay off. Make sure that they are organized from largest to smallest. You can see in the example that the Hill family has $82,155.00 in debt, and they need to have it paid off yesterday. The task at hand seems impossible, but they have decided they are going to get their spending under control and pay off the remainder. 
  • Pay only the minimum payments on the larger cards/loans and take the money you would pay and redistribute it to the smaller cards/loans. As seen in the example, there is a $250 balance on a Walmart card. Instead of paying off a few dollars on all of the cards, pay only what is required and pay off the smaller cards. You are trying to eliminate compound interest. By getting rid of the cards, you eliminate the compound interest.
  • Find extra money in your budget and put all of it toward your debt. This is the stinky part. If you sell your TV for $100 and save $60 a month on your cable bill, you’re already going to be able to put $160 the first month toward your bills. Then take the $60 every month after that and keep paying it into the debt. By doing this you will create momentum behind your bill paying agenda.
  • “Snowball your payments.” More of a Dave Ramsey term, it is a very simple process. Look at the Hill’s chart for instance. If you can find $200 a month to put toward that card by redistributing the money you’ve had to pay on the other debt to “keep up with it,” you will start to eliminate cards quickly. For example, this month you pay $200 to the Walmart bill plus the $35 minimum you were already paying. You only have $15 left. Next month, you take the same $235 you are used to paying and put $15 toward the Walmart bill (now close the account), and $220 along with the $35 minimum payment you already pay to the $560 gas card you have. Since you will pay $255 to the gas card, you’ll only owe $305 now. Next month, you’ll take the $35 you’re used to paying to Walmart, the $35 you’re used to paying to the gas company, and the $200 dollars you’re paying in extra and you’ll have $270 to put toward the $305. Next month you’ll only have $25 to pay. Let’s do this one more time! Now we’ll take the $270 we’re used to paying, put $25 toward the gas card (and close the gas card) and put the remaining $245 toward the $600 Best Buy card. Since we’ve paid the minimum payment on this card of $35 per month and it’s been 5 months, that Best Buy balance is only $425. We now will take our remaining $245 and $35 per month and bring that total down to $145. In 6 months, we will have paid off and closed down 3 entire cards. Once those are paid off, you now can use the momentum behind those cards to begin taking on the larger beasts. As you conquer each card, celebrate by marking the chart off and treat yourself something small but nice like ice cream!
  • Put 5-10% of your income away to create at least some savings! – We can’t stress this one enough! You must save to prevent debt. Say your car breaks down and you have to put $1000 on a credit card; you are now in debt. If you had put away 5% of your $400 a week paycheck you would have had $1000 in your account after 1 year.
  • Go down to 1 car! – Okay, maybe we seem to be a bit extreme. GO DOWN TO ONE CAR! There is not one reason why you can’t go down to one car except for wanting the convenience of having it. If you have 2-$350 car payments and 2-$100 insurance payments, you’re spending $450 a month too much! There’s no reason why you couldn’t get to work early or have to go to a coffee shop to kill some time while you make some money by creating an online business with the extra time that you have. Do you lose that extra time at home…sometimes. Do you have to wake up earlier…yes usually. Would you maybe have to carpool? Yeah. Is it worth $5,400 a year to you? If you pay 15% in taxes, that’s really $6,200 back in your pocket. You can have instant savings. In 5 years, you could sell everything and travel the world for about a year on a great budget for “free.”

Further Reading Material:

  1. Rich Dad, Poor Dad – Robert Kiyosaki
  2. The 4-Hour Work Week – Timothy Ferriss
  3. Financial Peace – Dave Ramsey
  4. Think and Grow Rich – Napoleon Hill
  5. Wired for Success, Programmed for Failure by Dr. James B. Richards
  6. The Storehouse Principles by Al Jandl and Van Crouch
  7. The Richest Man In Babylon by George S. Clason

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