For the past two weeks I have talked about the importance of eliminating debt. It is past time to get started. I did it and you can too. If you are in debt and do not believe you can take control then don’t waste your time reading this blog. But if you want to get out of debt and create debt free financial freedom – KEEP READING! Below four steps are recommendations to clean up your debt.

STEP 1: WRITE DOWN WHERE YOUR MONEY IS GOING?
Take a look at above inverted debt pyramid. These are the four categories we spend our money. When I stop by Starbucks and Panera Bread, I am spending my money in the Variable Wants section. You are going to have to honestly look at where your money is being spent and decide where you can make cuts and save money. This is not rocket science, use paper, excel spreadsheets or apps such as Mint.com. Divide your expenses in the four above categories. Many of your expenses, probably your biggest expenses, are Fixed Needs: Rent, Mortgage Payments, Car Payments, College Loans, etc. Then comes your VARIABLE NEEDS: Gas, Public Transportation , utilities such as electric, and gas, Groceries, etc.
Next we spend money, probably more than you think on our FIXED and VARIABLE WANTS. This is where we must exhibit control and use some of these dollars to start to pay down debt.

STEP 2: PRIORITIZE AND GIVE UP THE WANTS:
Some people spend up to $200/month at Starbucks. Are their drinks that good? Prioritize your variable needs spending from most important to least important. Do you have a gym membership you are not using? How much are you spending on cable, Netflix, HULU, etc? Give up or trim down your WANTS, you can live without. As my daughter would say “stop living the bougie life”. Your goal is to start paying significantly more than minimum monthly payments on your debts. So lets free up some significant dollars (set a goal) and start applying to your debt. Figure out how much of your income you can reasonably afford to throw at paying down your debt. Can you do it? Jake, a good friend, will pay his college loans off (>$80,000), end of 2018, in less than ten years. He is paying his loans off early because he and his wife control their wants and are SMART! In addition to early debt payoff, they have a handsome baby, a home, ROTH IRA’s and almost max their 401’s. They are setting themselves up for a wealthy future. In a couple of weeks I will interview Jake for my blog, so you can learn from his decision making and investment principles.

In Step 4, we will discuss how to prioritize paying off your debts.

STEP 3: IN ADDITION TO REDUCING WANTS, CAN YOU GENERATE MORE $$$$?
If you are married or living together, try and live on one salary. Many people do.
Get a roommate and apply their rent to your debt
Pack your lunch. Best sandwich in the world? Peanut butter and Jelly. Strawberry jelly of course! Do not buy those pre-made sandwiches, from the grocery store!
Cook more meals at home versus going out. There are hundreds of thousands of easy recipes on the internet.
If you are a clothes shopaholic- DETOX time. You probably have enough already. And no more shoes, for several months.
Drive Uber or Lyft.
Part time jobs. My wife use to work at department stores over the Christmas Holiday. Do not be too proud to work a job that pays hourly. You created this debt and you can eliminate it.
Cut your cable bill. My daughter relies on Hulu and Netflix. Probably saves herself $50-100/month.
Public transportation where possible to reduce your gas bill and parking. In the city of Chicago parking can cost you $40. I take the train to the city and use Uber.
Request people gift you money versus a store purchased gift
Sell unwanted stuff on eBay or Craigslist. Time to clean out your basement, closets, garage, etc.
Use your hobbies or professional skills: IT; Photography; Webpage Design; Writing; Dance Instructor; Piano Lessons; Set Up Electronic Equipment; Handyman. USE YOUR TALENTS!
If you’re highly organized and are good at time management become a virtual assistant. Find work through sites like: zirtual.com; Upwork.com; Indeed.com and Remote.com.
Online tutoring: Websites like Skooli, Tutor Me and Tutor.com
Use Ebates for Shopping.
Take on line quizzes for money/gift cards.
Side hustles including selling refurbished furniture on Craigslist and eBay
House and dog sitting.
Try a switch to generics versus brand name products: drugs, groceries, trash bags batteries, etc. In many cases the products are manufactured by the branded company.
Use MissingMoney.com and see if you are owed money you didn’t even know about from a bank, alma mater or phone company, etc.
I COULD KEEP GOING BUT YOU GET THE POINT. Do something you find fun and make $$$$.

STEP 4: PAY DOWN YOUR DEBTS:
Ok, you have reduced expenses. You are working part time at the Geek Squad and you are cleaning out your parents’ basement and selling the stuff. So now you need to prioritize the debts you pay off first. Below are two potential methods to prioritize debts to pay off. Other methods can be found using Google

A. AVALANCHE METHOD

I prefer paying off the highest interest debts first, while paying minimum on your other debts. This is known as the debt avalanche method. Advantage- you pay off your debts more quickly – and with less interest. YOU SAVE MONEY!
Look at above example. You have an extra $605 you can apply to your debts each month. You apply the extra $605 monthly to your highest interest rate -Target Credit card, until it is paid off in about six months. Next apply the $150 you were paying Target plus the $605 you have as extra (Total of $755) to your second highest interest debt-Discover Credit Card. By the time you pay off Target, Discover, Federal Student Loans, First Financial Mortgage, you now have an extra $2,285 you can apply to your Mazda Car Loan. {I know some people hate math. If any questions on either debt elimination methods, add to the comment section and I will reply.}

B. THE DEBT SNOWBALL METHOD

The next and most popular method, the Debt Snowball Method, pays your debts in order from smallest to largest, helping you achieve quick wins. One of my college professors has written several books on Change Management. One of his key points is in order to successfully change, we need wins and we need to celebrate those wins. To achieve major successes you need to celebrate the early wins. This method gives you quicker wins, as you first pay off your smallest debt amount.

Here’s a high-level overview of how the debt snowball works:
• List your debts from the smallest to the largest payoff balance. Again, disregard interest rates when you’re writing out your debts. Just stick to listing your debts based on the payoff balance.
• Make minimum payments on all debt except the smallest. Attack the smallest with everything you have.
• After you pay off the smallest debt, take the money you were paying on that debt and roll it into the next highest payment. See? Debt snowball!
• Repeat this method until you cross off the very last debt. CELEBRATE every time you eliminate a debt!

LET’S GET IT STARTED!
Pick the method you believe you can succeed with, or create your own modified method. You may want to start with the Debt Snowball Method to gain confidence and then switch to the AVALANCHE METHOD. The important thing is LET’S GET IT STARTED!
Just like a diet (something I know very well) as you start this journey you will have setbacks. You will get tired of saving and not going out, etc. Remember, it took time, probably years, to build up your debt. It will take time to clean up your debt. You are not your debt. It doesn’t mean you’re a bad or a lazy person. If you need help-call a friend, sibling, parent, etc., who is better at staying on budget. But get started.
As the Starship Enterprise, Captain Picard would say, “MAKE IT SO!”

“Learning is the beginning of wealth. Learning is the beginning of health. Learning is the beginning of spirituality. Searching and learning is where the miracle process all begins.” ― Jim Rohn