From $60,000 in debt to ZERO
I’d like to tell you a little story about a client of mine.
4 years ago she had $60,000 in debt. This woman is a good person, hard working, and she didn't have crazy spending habits.
How’d she get into so much debt? Her debt had accumulated from a business venture that didn’t work out.
Over the first year she struggled valiantly to reduce the debt and even though she made payment after payment... it never felt like she was really getting anywhere.
You know how that feels?
You’re running but your debt is running faster and it feels like a battle you just cannot win.
Through hard work and effort after 2 years - she got it down to $10,000.
But kind of like losing the last 10 pounds in a weight loss mission... She just couldn’t seem to pay off the last bit. She ran into what I like to call debt reduction fatigue.
You know, when you’ve been chipping away at something for so long you just want to take a break and go a little crazy? Can you relate?
I want to share with you some of the strategies we used to help her get down to ZERO debt. That’s right. She is now 100% debt free and working on building her six-month cash cushion and saving for a home down payment.
The first strategy:
She watched her spending but didn’t deprive herself.
First, we looked at her list of income and expenses. A basic budget formula to start from is the 50/20/30 budget breakdown. Simply put, your net income every month should be broken out as follows:
50% Fixed Expenses
20% Pay Yourself First/Savings
30% Variable/Fun Expenses
If your expenses do not currently line up to this, then the best first step is to see what you can eliminate and reduce expenses in both fixed and variable categories.
My client got rid of subscriptions she didn’t need. She called her utility and mobile company and asked them to reduce her monthly bill. She reviewed her accounts. She stuck to her budget.
My client still took mini vacations. Instead of maybe two weeks in Europe it was 4 days in Laguna Beach. She kept in mind that it was temporary so that she could be free to travel without the weight of debt after she paid it off. She let this inspire her.
She still bought clothes and got massages - she still took care of herself, but only spent what her budget would allow.
All of these added up to the first step she took.
I will be sharing the other 3 steps she took throughout all of April.
I made these bite size so if you’re dealing with debt reduction you can do these things for yourself as well.
So start with reviewing where your money is going and see where you can reduce spending.
The key is to take that freed up money and AUTOMATICALLY have it pay your credit card bill.
Will power is a limited resource. So don’t rely on it. Make your debt payments automatic and watch that number fall!
Comment YES below if you plan on taking action this week to reduce your debt.
Until next time...