In Dave Ramsey’s Financial Peace University, he describes two types of people as it relates to money – the nerd and the free spirit. If you are married, you have to determine which one you are and which one your spouse is so you can understand each other’s money habits. The nerd is the person who counts every penny. You practically have to pry money out of their hands. On the other hand, the free spirit allows money to literally flow freely out of their hands. Both of these personalities need each other. The nerd needs the free spirit to help them loosen up while the free spirit needs the nerd to help them with discipline.
Life has a way of tripping us up with obstacles. Some of these obstacles we create but others are brought on us. We all want to have enough money to live comfortably, provide for our families and save for the future. However, circumstances present themselves and we find ourselves in a position where it seems like we just can’t get out of the hole.
But there is always hope! No matter how deep you think you are in, you need to assess your situation and pick an action plan to get out of debt. Here are some personal debt reduction tips that my husband and I live by and you should too if you want to begin the journey to financial freedom:
1. Acknowledge the situation and stop dwelling on it
When we are going through a difficult time, it is often easier talking about it than moving on from it. After I had Caleb, I found out that I wouldn’t get my short-term disability. This meant that I wouldn’t get paid for another 6-8 weeks. I didn’t get a check from mid-May until mid-July. It was devastating because we are a two salary household. We needed every dime. This situation set us back financially and we went another year trying to get back on track.
The following April, we decided to get a financial planner to help us with our finances. She helped us take a hard look at where we were spending our money. It was hard. Nate and I were both in tears. But we didn’t stay there…we acknowledge where we were and decided we needed to get on a different course.
2. Stop putting yourself into further debt
Getting out of debt means stop acquiring debt. Cut up those credit cards! Whatever you think you need can wait. It is time to stop making a bigger financial hole, and time to start building a solid foundation. If you have children, this is even more important. They need to see you using your resources appropriately. Children will emulate what they see in us and we want to set the best example for our son.
3. Evaluate your current situation
Having a budget can be the most annoying yet most rewarding thing you can do for your family. We have to discipline ourselves to even do the budget. There are times when I don’t want to do it but I have to push through. Once it’s done, I feel a sense of relief and peace. Our budget is brutally honest. The numbers don’t lie. Either we can purchase it or we can’t and we know if we purchase something that is not on the budget, there will be consequences.
4. Stop stressing, prioritize and get to work
When we started doing the budget, Nate and I would disagree about some things. Who should get paid and when. Over a short time, we established goals for our family and a common ground where we could do the budget knowing we are taking care of the items we need to while saving for the items we desired.
When you are trying to reduce debt, there can be so much stress and tension in the household. We didn’t want our son to feel this stress; however, we want Caleb to understand the importance of being a good steward over his money. We decided to come to budget meetings with a open mind and just relax. This shouldn’t be a stressful time. We realized that not doing a budget and not knowing where our money was going is more dangerous than getting our priorities in order.
5. Get your spending under control and give every dollar a name
Everytime we want to purchase something, I always ask, “Is it in the budget?” I am serious about our family showing some financial responsibility. One of the things we try not to do is become so serious about the budget that we have no fun. We want to enjoy life but we always want to make sure we are not spending money and not holding ourselves accountable. This is the only way to get out of debt. You have to give every dollar a name even if it was $0.50 in the vending machine. If it’s $10/day on lunch, that’s AT LEAST $300!! You basically ate your phone, cable, or electricity bill.
6. Don’t get distracted! Attack it!
Once you have given every dollar a name, you can attack the debt head on. We do our budget in an Excel spreadsheet so we create sheets with the budget for different item – debt, short term goals, long term goals. We go down the list and pay everyone. We even pay ourselves for our short term and long term goals. We take this seriously and you should too. When an unexpected item knocks us back, we record the hit and figure out what it will take to get back on track and do it. It may shift some goals but we know exactly where we stand.
I love hearing story of financial breakthroughs and miracles. Share your story with us below. Our testimonies help others overcome life’s challenges and hard times.