It was hard to look people in the eyes. I wasn’t making enough money to make my minimum debt payments. I was thinking about filing for bankruptcy and walking away from our house. I went through bouts of shame and depression imagining my family out on the streets. I was almost 30 years old and I felt like I was in the bottom of a deep, black hole. Now 2 1/2 years later, I’m almost out of debt, and I’m running for the finish line as fast as I can.
*Updated, see bottom of page*
For those of you new to the site, here’s the story of how I went from broke and out of work, to doing quite well making my living on Craigslist. Once I got back on my feet financially, I quickly came to despise the chains of debt that had enslaved me for so long. I was encouraged by reading Rich Dad Poor Dad, Your Money or Your Life, Richest Man in Babylon, Acres of Diamonds and Dave Ramsey’s Total Money Makeover. Also, Early Retirement Extreme was very helpful in reshaping my view of what is possible. These books became like friends to me when I first started, always there to encourage me onward towards financial freedom. They are all very good books, and if you haven’t read them, they could very well change your life.
Here’s 8 practical tips to help you get out of debt.
8. Pay with Cash. It’s easier to make wise decisions when you feel the cash going from your hand to someone else’s. I basically stopped using my credit cards completely, except for small recurring expenses like Netflix, or occasional online purchases. The key is paying the card off immediately after you spend the money on it.
7. Cut your expenses. Spending more than we bring in causes us to get into debt. That has to stop. I recently wrote 18 Ways I’ve Stopped Wasting Money.
6. Change your cellphone provider. You can easily cut your cell phone bill in half by switching to flat fee cell phone companies, like Net10. They cost about $25 a month if you don’t use your phone much, to $45 a month for unlimited plans. This is another $600 per year savings per phone in your household. I’m in the process of switching my wife’s cell phone over right now, and mine will follow as soon as my contract is up in less than a year. You have to buy the phones up front, but you will make back the money and a lot more in the first year. Check out this article on how to buy a used cell phone.
5. Cut out cable tv. I just canceled cable this past week, which saved $50/month. I imagine most people are paying much more than that even. It’s $600-$1,200 a year that is being wasted, not to mention the waste of time and the negative effects on our health. If you really need to watch something, watch it online using Hulu or go to a friends house.
4. Sell your second car. I’ve already sold our second car, which saves us on insurance and maintenance. If I can get things set up in the business just right, I might consider selling our truck as well. It cuts down on monthly expenses and you can use the money to pay down debt. Walk more or ride your bike, both of which will improve your health. For those of you who can pull it off, sell all your cars!
3. Sell everything you don’t need on Craigslist. If you are in debt, you probably can’t afford to own many of your possessions. Sell them on Craigslist, even at a loss. You can always replace the items later on when you are out of debt. I sold our second car, most of my power tools, lots of furniture, electronics, books, clothing and extra shoes. Sell one possession a week until you get out of debt. Besides getting rid of items that are only collecting dust and depreciating on your shelf, you will end up with an uncluttered house. If it’s not making you money, and it’s not a picture of your sweet grandmother, sell it.
2. Buy everything used on Craigslist. Getting out of debt isn’t just about offense, or earning more money. It’s about defense as well, or guarding more closely how you spend the money you do have. I’ve found that impatience is the greatest enemy to buying things used. We think we need things today, so we go to the store and buy something we can’t afford. If you are in debt, like I am, we can’t afford to buy most things new. Oh, right, buy everything used, your thinking. Yes, I have purchased underwear at garage sales, though they were still unused in the package. My point is that you have to attack all your spending habits, and if you really need something, do whatever it takes to buy it used, and only new as a last resort. If you find yourself making excuses about why you can’t buy things used, I’m going to predict that you will have a very hard time becoming debt free.
1. Make money on Craigslist part time/full time. To get out of debt you have to be really serious about it. This might mean you get a second job, but that comes with some big drawbacks, primarily your freedom. If you need to spend a day with your family, or your wife, or your friends, a second job can prevent that from happening. If however you are making side money on Craigslist, you are free to step off the pedal for a day when you need to. It’s nice to have the freedom and flexibility amidst a season of extra work in order to pay off debt and save.
You can also make Craigslist your full time job. I know it’s not for everyone, but if you can pull it off, owning your own business is an incredibly powerful way to quickly pay off your debt. If you need to make more money, you can work more hours or days during the week. If you are very good or talented at what you do, you get to reap the rewards of your hard work, which often shows itself by an increased income.
Finish line in sight
I’m getting close to the end of this first debt repayment marathon. The debt could be gone within 4-6 months if I work really hard and take frugality to the extreme. After the last payment, there will be a reward, which might have something to do with surfing out in Hawaii. Besides the long term benefit, give yourself a short term reward to look forward to.
After that, I will begin working on acquiring and literally building some income producing assets. At the same time I will be working on paying off our house before I turn 40. Set crazy goals for yourself and you just might achieve them. I’ll share more of my plan later on.
I want to encourage you to do whatever it takes to get out of debt. I’m not even there yet and I can already taste the freedom. It’s not worth living life under the cloud of debt forever. Best of luck!
Are you working on getting out of debt, or have become debt free? What advice would you have for others seeking to do the same thing?
*Update Nov. 5th 2013, Now out of debt! It took just over 6 months. Now onto paying off the house over the next 7 years!*
Do you owe money on your house? Yes, I’ll still owe money on our house, but we purchased it at the bottom of the market a few years ago, and now have considerable equity in it.
Do you owe money on your vehicle? We own our truck
Do you have student loans? Thankfully no.