How to Organize Your Debt, Then Pay It Off
Money has been a hot topic around my household over the past 8 months. I have never been one to worry about money much. Not because I'm rich, but because everything always seems to work out. Also, because I don't stress about stuff like that. However, that all changed earlier this year when I decided to close my brick and mortar store front and move my entire business online. (I plan on writing a post about this time in my life in the near future, stay tuned!)
Back in February 2017, I decided my heart wasn't in the retail world anymore. Money was constantly tight, sales were decent but nothing to get excited about. The rest of the world had moved online, and our online business was booming compared to the store front. At that time, I sat down and wrote out all of my debt. I needed to know how far in I was and what my next step should be. Sell the business? Move it online? Stay open? After a whirlwind few months of trying to figure everything out and make things work, I decided to close the storefront in June 2017 and move online only.
It was at that time that I took a long, hard look at my debt. You may be wondering, why am I telling you all of this? What does this have to do with organizing debt? Because by organizing my debt, I have paid off almost $100,000 in debt in 8 months. Yes, you read that right. By getting serious about my debt and being honest with my situation, I was able to get a grasp on my finances.
*This is the first of MANY money topics. As we go on this journey together, you will learn that I love to talk about money. I do not believe money is a taboo topic, however I know that a lot of people do. These are my opinions, my strategies and what has worked for me. I am not a professional by any means, but I am a real person who likes to be real with people.
Here is what I did, and some tips for organizing your debt:
Write everything down... on paper.
I really emphasize writing your debt down on paper, at least initially, so that you can familiarize yourself with your debt again. How many of us know that we have a car loan, but really don't know much more than that? The payment is taken out automatically, but when was the last time you actually looked at the paperwork for your monthly payments? Do you even remember the APR on your loan?
Write every last single debt that you owe down on a piece of paper, even if it's the $5 you owe your coworker for lunch last week.
If you want to go one step further, transfer all of those numbers into an Excel sheet. That way you can look at how far you have come since starting the journey of paying off your debt. I just rewrite my debt each week in one notebook and flip back so I can see where I started. Doing it each week isn't necessary, probably every other week or once a month would be enough. However, I am on a mission to be debt free so I may be a little overzealous.
Write down the APR for each debt.
APR (Annual Percentage Rate) is the real gut puncher when it comes to debt. Do you know how much you're paying in just interest alone each year? I didn't for a long time. I was the person who never opened the credit card statement because I just didn't want to know! (Please, read your credit card statements! Every single month!) Once you have written down your debts, place the APR next to each one.
Order your debt from highest APR to lowest.
Is your credit card charging you 13.99% APR but your car loan is only 3.99%? Well then you better be working your tail off to pay off your credit card, fast. At the beginning of my debt payoff this year, I was paying off the loans that I felt most suffocated by. If I owed an actual person money, they needed to be paid back first. I wasn't paying attention to APR at all.
Assess your debt.
What I mean by this is, if you feel suffocated by the $100 you borrowed from Cousin Johnny, then pay that first. Paying off the highest APR is best as far as being financially responsible, but sometimes you need to be mentally responsible. If one debt in particular is keeping you up at night, pay that off first.
Create a debt payoff Goal List.
My goal is to be completely debt free by October 2018. That is one year to pay off $304,071.77 in business and personal debt. Again, why would I tell you something so "personal" about myself? First, because I don't think that talking money is taboo. Second, because I need to be held accountable.
Create goals for your debt payoff, then talk about them with someone you trust. If you want to pay off $5,000 in debt in 3 months, then talk about it. Tell people. Because when you start actively thinking about your debt, in a positive light, every day, you're more apt to reach your goals! Also, have this person hold you accountable.
Here are some "Goal List" ideas:
· Pay $500 extra towards your debt each month (This will pay off $18,000 in debt in 3 years).
· Remove unnecessary spending each month and put that money towards your debt.
· Research ways to make extra money on the side to put towards your debt.
· Decipher between "wants" and "needs" when it comes to making future purchases.
· Do not beat yourself up over your debt.
Do NOT beat yourself up over your debt.
I wanted to talk about this one a little bit more from the Goal List. A LOT of people have debt. Some have more than you, some have less than you. But you are not alone! If, at any time, you are feeling alone and suffocated by your debt, reach out to someone. I promise you that they either know what you're going through, want to help, or want to put you in contact with someone that can help.
You can reach out to me if you want. I just told you that I am $300k+ in debt... but you know what, I used to be almost $400k in debt. And that was just 8 months ago. I would be happy to talk about your debt, or my debt, or anything to help you feel better about your financial situation.
One day, you CAN be Debt Free.
It's not going to happen overnight. But if you truly want to be debt free, YOU CAN! Put your mind to it. Work towards your goals every day.
Get a side hustle & put all of your extra resources towards your debt.
I have made $9,000 this year by selling old clothes on Poshmark. Yes, some did come from my clothing store but some also came from my own closet.
What is something that you are good at that you can earn extra money from?
- Can you take good photos?
- Drive for Uber?
- Proofread/Freelance write
- Teach an online course
- Did you know that they pay people to take surveys?
All you need to do is google it. I PROMISE you that there is something out there that you can do. You have to want to do it though. There are so many jobs that you can do in your spare time. You don't have to work a second job or second hustle for the rest of your life, but wouldn't you rather do it now so that you can relax a little more next year?
I know that this sounds a little crazy, but focus your energy towards paying off your debt. Save your spare change, don't go out to eat, don't buy unnecessary crap, cancel your television provider, etc. Focus all of your financial energy onto paying off your debt. Before you know it, you will have paid off more debt than you thought possible.
I was able to pay off almost $100k in debt by selling the building that the store was in, eliminating all of the expenses that come with running a store (ex. utilities, maintenance, etc.), and by not spending money on anything "extra" for 8 months. I want to add that the building was only $40k of the $100k payoff so that you have a clear picture of what you can do too.
It takes time, patience and action, but if I can do it, so can you!
What are your financial concerns? Does debt keep you up at night? I would love to hear from you!
**I am not a financial expert. I'm just a real person that has spent the last 29 years making BIG financial mistakes. All opinions are my own.
THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLOSURE FOR MORE INFO.