Are You Ready to Get Rid of Your Debt Yet?

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Do you currently have car loans, credit card debt, or student loans? Or, maybe you have all three! Whatever the case may be, if you have debt, I’m sure you must be getting sick of making those payments every month. What if, instead of paying out $1,000 toward your debts each month, you could invest that money for your future? Do you understand what kind of impact this could make in your life?

Paying Debts vs. Investing

Within the past couple weeks, I have had the urge to buy a boat. I’m not quite sure why, but just the idea of cruising around on the open waters has been very appealing to me lately. So, let’s say I found a deal on a 40′ yacht and got some financing from the bank (if you know me at all, you’d know that this purchase would be with cash or it wouldn’t happen at all, but just roll with me in this example 😉 ) and owed $750 a month for the next 7 years. After those 7 years, I will have paid the bank a total of $63,000, but after the years of depreciation, my yacht is only worth $50,000.

Now, what if instead of buying the yacht, I decided to invest that $750 each month for the next 7 years? Assuming I could earn a return of 8% each year, guess what my investment will be worth by the time I retire (keep in mind, I only invested my money for 7 years, and then contributed nothing for the next 33)? Drumroll……… my investment account will have $1,112,809.06 in it!!! And here’s the real kicker, what will that boat be worth if I held onto it for the next 40 years? Probably next to nothing.

So What Will It Be?

So which would you rather have? A dilapidated boat, or an investment account with over a million bucks in it? Sure, the boat would be fun, but think of what you could do with a million dollars! That investment account gets my vote for sure.

How Can You Start Crawling Out of Debt?

For almost every debt scenario, the first step is the same, sell a bunch of stuff. By selling all of your non-necessities, you can acquire the amount of money necessary to put your initial dent in your debt.

Beyond that, you’ll need to tighten up your budget. It’s no longer OK to go out to eat every other day or buy expensive gifts for all of your friends. If you truly want to get out of debt, it would be wise for you to begin thinking of activities that you enjoy, but won’t cost you an arm and a leg to do them.

Increasing your income is always a good idea as well (as long as you continue to stick to your budget and don’t start increasing your spending along with your new-found cash). Find a job at a local restaurant or make some cash with your own side business (lawn mowing, snow plowing, graphic design, website building, etc.) and put it all toward those debts.

If you follow these simple steps and begin paying off one debt at a time, the snowball effect will happen and you’ll begin putting more money toward your debts than you ever thought possible. Once that snowball gets rolling, you’ll be well on your way to paying off every single one of those debts.

What If You’ve Already Hit Rock Bottom?

If your finances are plummeting farther and farther into the negative and you absolutely feel like there’s no way to get out of debt on your own, it might be time to look toward some debt consolidation companies (like Fresh Start UK). While they often do charge additional fees to get you out of debt, at least you’ll be held accountable for your actions and you’ll have a plan to escape the grasp of your hopeless financial situation.

Are you currently working your way out of debt? Are you feeling the snowball effect yet?

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Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

8 Comments

  1. One of the hardest parts of working our way out of debt was watching a lot of our friends upgrade their lives. Even though we had salaried careers, we lived like broke college students. It only took a brief second to remind ourselves WHY we wanted to be debt free and it put us back on track to knock out those student loans!
    Jessica @ Budget for Health recently posted..How Much Protein Do You Need?

  2. I’ve been trying to work on a snowball, but have been caught in a one-step forward, one step back loop. I pay off one debt and a new one crops up. As soon as I paid off the smaller of my two credit cards, I wound up with a $3000 medical bill from what my insurance didn’t cover.

    • Eek. Yep, those unexpected expenses will reek havoc on your finances. I would suggest putting at least $1,000 in an emergency fund – that way you can keep paying off those unexpected expenses without taking on more credit debt.

    • Sounds like you’ve got a mind for success!

  3. I like your title – you have to WANT to get out of debt, and you have to be ready for it. If you’re comfortable with it; if you still want stuff more than you want tobe debt free, you will never make it. I know, we’re there right now. Too comfortable to really worry about it…
    Kris @ Balancing Money and Life recently posted..Weekly Link Love – August 24, 2012

    • Awesome job paying off that car! Now onto the next thing! 😉


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