5 tips to kickstart your debt-free journey

The freedom you gain by being debt-free is unexplainable. Those sleepless nights are gone. The worry you may receive a call from a debt collector vanishes.

And that leaves you wondering – why in the world did you get buried in debt in the first place? For some, it may be student debt – and that’s nothing to be ashamed of, and for others, it’s credit card debt. Either way, it’s a sinking feeling to be in debt. But like all bad moments, this one can pass too. 

A debt-free journey is not for the faint of heart. It’s like going to the gym regularly to lose weight. The journey can be difficult, the initial months may not show any results, but it pays off in the long run.

Here are five tips to kickstart your debt-free journey. 

Track your $$$

You can’t solve a problem without confronting it. In this case, you cannot go debt-free without acknowledging your income and expenses. 

A good way to know where you stand is by creating an excel spreadsheet. Your list should consist of all incoming and outgoing funds. 

Once you track your expenses, it’s amazing to see where you need to make the changes. We recommend doing this exercise at the end of every month. 

After crunching the numbers, a good question to ask yourself is – what’s my leftover amount and can I contribute that extra amount towards being debt-free? 

Use the debt avalanche method

Drowning with multiple debts? Good news! The debt avalanche method can help you get rid of it sooner.  

Credit cards are one of the highest interest-bearing financial products loaned to you. It’s easy to access the money you don’t have with a single tap. When it’s time to pay the money back, you have to pay a lot of interest too.  

The debt avalanche method allocates extra funds to pay off your highest interest rate credit card or loan first. 

The idea behind it is to reduce the highest interest debt as fast as you can. Once you’re done paying off the card, you go to the second-highest interest card/loan. The process repeats until you are completely debt-free. 

Keep in mind that while you’re focusing on one debt at a time, you are not ignoring the others. You are simultaneously paying off the minimum or required amount for the rest. 

This method is a good strategy because it prevents you from paying the overall interest rate that accumulates. The debt you owe keeps tumbling down faster – just like an avalanche!

Side hustle your way out of it 

In today’s time, having a side hustle is easier than ever to find – from offering a skill to good old-fashioned dog walking. For some, it would be getting a part-time job. 

Whatever the side hustle is, the reason for doing it is the same: to achieve your financial goals! And why not? An extra $500 a month contributes greatly to help you live a debt-free lifestyle. 

In fact, by 2017, one in every five employed Canadians had a side hustle/part-time job. 

Control lifestyle inflation

When you earn more income, it’s difficult to resist lifestyle inflation.

Lifestyle inflation is when your income increases, your spending increases accordingly too. This can be a major setback when it comes to becoming debt-free. When you get a raise, you buy a newer car. Or when you switch to a higher paying job, you spend $800 on Jimmy Choo heels. 

Even if you can, should you? Because this contradicts the freedom you are working so hard for. Worst of all, it can overthrow your entire game plan if it becomes a habit. The more you earn, the more you burn! 

Don’t think of it as living a boring lifestyle or living beneath your means. It’s more like continuing your current lifestyle until you cross that threshold. 

The point is: leave no stone unturned to pay more than you can.  

However…

Reward yourself on every milestone

True, this journey requires Sylvester Stallone’s training-like discipline to acquire.

But just because it’s intense, shouldn’t mean it can’t be fun or challenging. Like the movie, the ring you are in fight with, also has rest periods every round. 

So, once you complete every round of little or significant milestones, celebrate your win accordingly! After all, it’s an accomplishment to be proud of. 

A strategic reward will not only bolster your attitude but will leave you more confident and motivated than ever to follow your debt-free journey through. 

There will be setbacks…  

Okay, so once in a while, setbacks may just happen. 

And if they do, it’s completely okay. 

It’s alright to pause an aggressive attack to kick debt out of your life. Sometimes, emergencies knock at your door and you have to deal with it. 

Don’t be disappointed. Because it proves that you are an adult and that you are maturely dealing with life. 

Ridding yourself of debt takes time. We believe that you will get there!

Be sure to tune back in throughout the month of November for more from all of us at Clinton Wilkins Mortgage Team. We are always willing to help answer your questions directly. You can get in touch with us here!