8 Steps to Getting Out of Debt: A Guide to Financial Freedom

That's why I wanted to put this episode together and talk a little bit about eight steps of getting outta debt. And I'm gonna show you how to develop a plan, stick to it, and finally achieve financial freedom. So let's get started. So the first thing that I want you guys to think about is imagine living debt free . When you're free of debt, you're free to do what you want with your money. You can save for the future, invest in yourself, or simply enjoy life without worrying about your finances.

Debt can be debilitating, making it hard to move forward in life, but when you're debt free, you have the freedom to achieve anything you want. Debt does affect us negatively in our lives. Some people don't think so. I totally believe so and no , because I've been on that journey and debt sucks the life out of you. For starters, it can be difficult to make progress financially when you're way down by two more debt , you struggle to maintain a good credit score.

And also it's a major source of stress and health issues. And the other thing, it's a major player in relationships, divorces, breakups. It's just not a good thing to have have. And when your debt is outta control, it's controlling you. I saw this quote this morning that said , uh , go to bed hungry. I I'd rather, excuse me. I'd rather go bed. I'd rather go to bed. Let's get this straight. I'd rather go to bed hungry than wake up in the morning in debt . Very powerful quote.

I'd put it out there. So take a look at it on our social media. So let's get to it. How to get outta debt. I'm gonna cover some basics. I'm gonna talk about eight steps, but the first thing that I'm gonna, I'm gonna stress and it's gonna be a big stressor. You gotta stop borrowing money. You gotta stop using your credit cards. You've gotta make a conscious decision to say F it , I'm cutting them up and I'm going to stop using them.

The only way that happens is you making that conscious decision to do so. And before you, and when you stop borrowing money at the same time, you've gotta start putting away an emergency fund, at least a thousand dollars. And you're probably saying, how am I gonna come with a thousand dollars? I guarantee you, if we went over your monthly budget, I could find probably 200 to $400 in additional spend that's out there that you're , that you're living.

You know, as I call the life of luxury and everybody says, well, I need to go out and I need to do need to do that. Well, if you're in debt, you don't need to go out. You need to grind it out with a second job to get that debt paid off. So you're paying cash for everything. And you , then the next thing you're gonna say, I can already hear the , this is what I get with my coaching , uh , clients.

Well , if I don't have a credit card, how am I gonna rent a car or get a hotel room or , uh , travel as long as it's got a visa or MasterCard logo on it, guess what they're accepted? I pay it with a debit card all the time. When I rent a car. And when I get a hotel room, no problem. They just, they just take more, they secure more money as a , as a down payment initially to make sure that there's no incidentals on the room. But after that, it's the same thing as a credit card.

It's not a big deal. So get outta the mindset that you've gotta use a credit card because using a credit card costs you money and that money is valuable. Step one, figure out how much debt you owe. If you don't know how much you owe and how much is going out on a monthly basis, you're in deep poo . This includes all your credit cards, your student loans, your personal loans, your debt consolidation, your auto loan payments.

Did I miss anything , uh, medical bills, anything that is an outgoing number, your rent, your mortgage , uh , your utilities, your shopping, your groceries, anything that goes outbound. You need to put it down and you know exactly what goes outbound. And then on the other side is you need to know how much you have incoming. And then you put, you subtract the positive, which is your income from all your expenses to figure out what you have left over .

If you're negative, you've gotta start cutting. And even if you're living on a hundred to $200 extra a month, you can still live off of more or live off a less, excuse me, cuz at the end of the day, why do you need a live above your means? Why not live below your means put more money away and you never have to worry about money period . So step number two, list all of your debts in balance order and take the smallest balance and focus on that particular account or debt first.

So smallest balance at the top largest balance at the bottom. This is part of the debt snowball method by Dave Ramsey. I believe it, cuz I did it and I, and I made it work. Whatever your minimum payment is. So let's say it's a , a , a 1500 or $2,000 credit card that has a hundred dollars payment. Now you're gonna take that a hundred dollars payment and whatever you have extra after you've carved all your additional spending that you don't need.

Starbucks, lunches, drinks, movies, traveling, that's all put back in the numbers. And let's say you have an additional $300 a month. You take that additional $300 and you apply it to the hundred dollars. So now you're putting $400 towards that debt of $2,000. And then once you actually pay that debt off, you'll roll it to the next. But during that time, while you're making that additional payment on that smallest debt, all of your other debts, you're making the month fleet minimum payments.

And you're probably saying, well, I'm gonna pay more in interest over a period of time. If I don't start paying down the highest interest account first. Well, yeah, you will. But guess what would you rather have some quick wins and know that there's light at the end of the rainbow to keep you motivated or rather grind it out longer when you want to pay off that higher interest account and then be, oh, I haven't paid anything off and get demotivated and stop. I've already done both.

And the snowball method works better for me, but I'm just being biased. You know, If you're not organized in this process and you don't have a monthly budget and, and you haven't laid out exactly what's going out and what's coming in, you're going to fail. And the biggest takeaway from my personal journey that I can tell you is I never managed a check. I still don't manage a checkbook, but I made a monthly budget every single month.

I knew exactly what I was coming in with and what was going out. And I always managed it down to the penny. Well , I don't have penny call it the dollar, but if you don't do that, you will not be successful because you have to be the on that puts the kibosh to your spending that you don't need. All you need is a roof over your head food on your table, close on your back, a warm or a cool house, depending on where you live and transportation to work.

If those five things are covered, then BA being BAA . Boom, you're good. Everything else is gravy. So you have to sacrifice for 24 to 36 or 48 months to pay off the debt. It in full don't, go with debt settlement , uh, or, or try to figure out how you can get , um , your principle balance or sorry. Your balance is waived. Cuz guess what? When they do that, that's that's called a settlement. So what's gonna happen. That becomes income to you. So if you don't pay more taxes, you don't do that.

And two, if you have a, I got my collections hat on, sorry. If you actually have an account that's been charged off and you do a debt settlement, let's say it's, let's say it's 5,000 and you settle it for 2,500. So $2,500 will go into income to you. And then, oh, by the way, depending on the statute of limitations of where you're at, they potentially can decide to say, okay, I wanna litigate or go after you for the other 2,500. It does happen.

Even though they put it in writing, they still have the ability to come after you. So don't let that happen. Don't take the shortcut. And then the , the debt settlement companies then charge you 15 to 25% of what your total debt is. So if you got a hundred thousand dollars worth of debt, that's $25,000 that you have to pay on top of that.

So unless they're saving you $25,000, it isn't worth it, pay it off by yourself, go get yourself for life, coach and work with him or her on getting your finances together and getting you right. And if you can't find one, call me, I'll help you. No problems asked. Sorry, no problem is too much to ask for. Cuz I will find a solution for you, But if you're not being Solution oriented on this piece, you're going to fail and you'll never get outta debt.

And ultimately you'll have to file bankruptcy and that'll be just a whole nother . That's a whole nother kick in the gut that you don't want. But if you, if you sit down and take and figure out exactly what you're doing with your money and where it's going and what's coming in, I'm telling you you'll be successful because it gets exciting. It gets to be a game. At least for me, it was every time I got extra money, okay, I can go pay off this account.

So how many more months do I have before I can pay off that account? And I would do countdown on the current one that I was working on so I could, I could celebrate. And that was one of the biggest things that I did was I celebrated my wins. I celebrated when I paid off a debt, I celebrated when I was able to roll additional monies into the debt that I was working on outside of that, maybe I was side hustling, whatever, but I celebrated those things cuz ultimately I wanted to be out of debt.

And the only way to do that is to be organized and have your plan of All right guys, before you even pay off a nickel of your debt, you need to make sure once you've got that monthly budget in place and you know exactly what's going out, you know exactly what's coming in, then you need to have an emergency fund put together a thousand bucks. Do not, you know, do not pass. Do sorry, do not pass. Go do not go directly to jail.

Don't do any of that monopoly stuff, go directly to your bank account and put a thousand bucks in there. If it takes you several months, then do it continue to pay your minimum payments, but cut out your spending while you are . So you actually have some breathing room, Your basic necessities, you can learn to live on less than what you make. You don't have to keep up with. The Jones is because the Joneses are always broke. It just doesn't work.

When you get that emergency fund, take that first balance, that smallest balance and take the minimum monthly payment And add additional dollar amount that you can do. Whatever you can afford. You add it there And you go after it. Also during this time, if you have the ability either to maybe potentially get a better job or side hustle or sell things , uh , or Uber or deliver , uh , groceries , um, I don't know what else I can think of a side hustle, sell things on, on eBay or Etsy.

You need to do it. It's the only way, not the only way. It's a great way to add more money to your pocket, but also put some of that away for the debt and pay off your debt quicker. If you can find additional revenue sources for yourself or your family or whoever then guess what you get to pay that debt off sooner rather than later, You got you. You you've gotta stay focused. This is really about step number eight it's it's it's coming to that end of okay. Here's what I do.

Debt can seem like a dark and insurmountable force that we have to deal with, but getting outta debt is possible at the right plan. Like I told you in determination, it's all about getting organized, creating a plan and staying focused on getting rid of your debts one by one, until you pay them off completely, you'll find that paying off your debts will give you so much more freedom than living in constant fear of how to make monthly payments.

And not only will you be able to sleep better at night without worrying about how your bills and and expenses are, are gonna be paid, but you'll get in a better habit of saving money on a monthly basis and be able to put additional money away for yourself for investing, or maybe you're looking to buy a house, But before you know it you'll be debt free . You just have to be focused on the end result. How however that works for you. So you've paid your debt off.

Now you need to review your credit report. You gotta make sure that your creditors have reported your accounts correctly as in paid in full and then you've already closed them. If they're not, you need to be contacting your credit issuer and ask them to update the information. Typically they take 30 to 90 days to get those updated, but you need to make sure that's done because you want it reflected of that. And you're not gonna need to use credit anyhow. So guess what? Just close.

'em be done with them . But here's the other thing is When you , you do that, when you get there, I'd love to hear how you feel. Because at the end of the day, it was liberating for me when I could , when I called and made sure that they were closed and they had zero balances and I did Cartwheel and I not literally, but I did in my head. So You've gotta, you gotta stay on top of that.

You don't want, 'em be left open, especially if they're charge off or their collections , uh, or you had litigation on them. You , you need to, You need to make sure they're being reported correctly, cuz you want all that, all that information to be correct. So if you do go out and buy a house, when people look at it, they know that it's paid off and it's taken care of Two more, little bit of a different , uh , not different difficult conversation.

The first one is talking about changing your behaviors that got you into debt. Having money is , uh , the key to reducing credit. Uh , any debt whatsoever, credit card, personal loans , uh , student loans, auto debt. Even if we win the lottery, it doesn't solve a problem because if you don't know, within five years or 10 years, I can't remember what it is. Uh , majority, I think it's 60 or 70% of lottery. Winners are broke.

The reason why people become indebted is so diverse and everybody's got different things, could be school failure, unemployment, medical expenses, money mismanagement. The reason for you, or for me is irrelevant. The important is to avoid it. And the most challenging thing is it's easy to do the last thing. You don't have to use a credit card, use your debit card. It's got out a visa , MasterCard logo on it.

It's It is something that you guys really have to dig into to understand, you know, where you're at with your money and why you're doing it. I don't know if it's because you're trying to keep up with the Joneses or it's how you've always spent. Uh , and you've had a reduction in income. I don't know, but at the end of the day, you've gotta live below your means and by doing so, it'll get you out of debt.

If you still need help and you don't know where to go Reach out to a financial coach, reach out to a debt coach, reach out to a life coach, reach out to me. I can help you with any of these things that we talked about today. Cuz ultimately I wanna see you guys succeed. Be financially free and be able to live the life that you wanna live without having debt hanging over your head. Because I know when I was in debt with a over six figures of debt, life was pretty crappy.

I was stressing about money every moment of the day, it consumed me to where it ate at my mind. It ate at my stomach. It just is not healthy whatsoever. I don't want you guys to live at at life and there's ways to get out of it. You just have to be persistent and determined. And if you're, if you're both of those, you'll win, you'll win at the game of life And you're gonna win with getting you're debt paid off and living debt free . Think about all the money that was going out.

I'll tell you mine At a high peak with my mortgage, I roughly had about $4,500 of debt servicing going out on a monthly basis, my mortgage 1300 bucks . So you figure that out. So it's $3,000 a month in debt servicing going out $36,000 a year. What could you do ? What could you do with $3,000 a month? I know I could do a lot with it and I'm doing a lot of things with it. More investing, more savings, enjoying life, But you can't enjoy life.

If you're strapped , uh, with debt and not being able to make those pay payments or you can make the payments and then you have nothing left over at the end of the month, It just doesn't work. The math does not add up. All right guys, that's it for this week or sorry for this episode this week, I'll have another episode out on Wednesday. I hope you guys had a great weekend. You have a great week ahead, please like comment and share.

I do like the feedback that I'm getting, you guys are starting to understand where I'm coming from and you guys are realizing that I'm here to help and I'm always gonna be a resource for you. We are a community. Stay safe, stay healthy, have those conversations. It is okay to disagree because we are human. There is no canceling here. I'll see you guys on the other side, have a good one .