The two most popular New Year’s resolutions are losing weight and getting out of debt. Money Crashers wants your physical life and your financial life to be as fit as possible, so the next five articles will be a series to help you get rid of your financial gut. Step 0 to becoming financially fit is to seriously work on becoming better physically fit. You’d be so surprised at how much your financial, relational, professional, and spiritual life can suffer if you’re not in good physical shape. If your body doesn’t feel good, the rest of your life will suffer as well!
Step 1: Get Out Of Debt As Quickly As Possible
The first step to losing weight is not exercising. The first step is getting rid of all of the junk in your refrigerator. Think of paying off debt like throwing out junk food in your house. In the popular show, “The Biggest Loser”, getting rid of the junk food in your house and changing your diet is often the first thing they do on the show.
Debt Is Like Junk Food
The more McDonald’s and candy you eat, the fatter you’ll get. The more debt you consume on your credit card, the worse off your financial future will be. Paying off a $10,000 credit card would be like losing 50 pounds. Imagine how you’d feel losing 50 pounds if you were 50 pounds overweight? Paying off that $10k will give you the same euphoric feeling, because it’s a virtual weight off your shoulders.
How Do I Get Out Of Debt?
- Save $1,000 to $2,000 for a small emergency fund Set the money aside in a separate bank account and don’t use it unless you really need it for a true emergency
- List your Debts Smallest to Largest and attack one debt at a time. Attacking them from smallest debt to largest debt helps you build momentum and free up more income to attack the larger debts.
- Get on a written budget. You’ll give yourself an instant raise by making your money behave on paper. Be purposeful with your spending and know where it’s going. This will not only allow you to put more money towards your debt, but it will help prevent you from getting into more debt.
- Find creative ways to boost your income. An extra job, selling stuff, starting a side business, cleaning houses, pet sitting, and many other ideas can earn you extra money to throw towards debt and speed up the repayment process.
The next step to getting financially fit is building up your emergency fund.
Create an emergency fund of 3 to 6 months worth of expenses.