A while ago, I posted a blog about my husband and I’s journey of paying off our consumer debt and how we have chosen to do our best to avoid it going forward. In it I am honest about how it’s not the easy path of lollipops and gumdrops. If it were easy, everyone would be doing it. We’ve sacrificed heavily for the peace of mind of not being tied to multiple payments, but for us it has been worth it.

I’m also not saying that we have it all together all the time. Things like job layoffs and variable incomes and having a fixer upper farm have really put a wrench in our plans at times, but we keep on keeping on. So with the idea of progress and not perfection in mind, I’ve decided to share the process we used on our journey to pay off consumer debt .

1. Stop using debt

Stop it. Just stop. In order to save the patient that is your finances, you have to stop the bleeding or there is no point in doing any of the other steps. I know this might seem like a no-brainer,  but it is really easy to slowly wander into debt after you have paid it off causing you to feel like a hamster on a wheel that isn’t making any progress. This happens if you never draw a the line in the sand and commit to debt not being a solution for them anymore.

man on mountain top enjoying debt freedom

I get it, emergencies happen. Vehicles and furnaces need repairing at the most inconvenient of times and there may honestly be no money in the account to keep things running. If this is the case, I’ll address how to deal with this in another step.

I’d encourage you to also take an honest look at what you are using debt for. Are they really emergencies, or are you swiping the credit card out of convenience and lack of planning? In our instant gratification society, it’s easy to do. Take some time and look at your statements. This is a hard exercise, so remember not to send yourself on a shame spiral. Also, be careful not to justify your way into old comfortable habits.

2. Create a plan for your money

If you don’t tell your money where to go someone else most definitely has a plan for it. Billions of dollars and just as many hours are spent each year creating marketing and making plans to attract your hard-earned money. If all of these efforts are made to take money from you, why aren’t you spending an hour or so a month in efforts to keep some of it?

A good place to start is by going through two months of bank and credit card statements to get a realistic view of what you are spending every month. Once you do this, you will have a good idea of what your cash flow plan should really look like. This is usually an alarming reality check at first, since people typically spend a lot more than they think on things like eating out and entertainment.

Once you develop an accurate idea of what you actually spend in a month, it’s time to make a plan. Most people know their fixed expenses, meet them easily, and have automatic withdrawals. This usually works great, so now it’s deciding what to do with the “extra” after those bills have come out.

Setting boundaries on discretionary spending was the hardest, but most effective thing we did to pay off debt. What helped us was getting cash out of the bank for things like groceries, eating out, and miscellaneous spending at the beginning of the month and sticking to the amounts we had withdrawn. This is really hard to do, but I assure you the pain is temporary. When the payments disappeared, so did a lot of our restrictions in this area.

3. Save up a small emergency fund

Before we put a cent of the extra money we had found in our income towards debt, we saved $1000 for emergencies. This got us through most unexpected events and every time we needed to dip into this account, we would just pause our debt repayments until it was replenished.

If you are going to commit to not using debt, then you need to have something to fall back on. An emergency fund is instrumental in any financial plan, and 3-6 months expenses is ideal but a small one like this will get anyone started.

4. List debts from smallest to largest

There seems to be a lot of differing opinions about how you should go about paying off debt, and really it doesn’t matter as long as you are making progress. What helped us make progress was listing debts from smallest to largest, paying the minimums on all of them and focusing all the extra money we had on the smallest debt on the list.

This gave us a feeling of progress as we were able to knock the smaller things off the list pretty quickly and by the time we got to the bigger items, the amount we could pay towards them were larger. Getting rid of the smaller debts first gave us a lot of momentum and helped us believe we could win.

5. Commit to progress

Although the steps above are really simple, they are a challenge. In our journey to paying off debt, real life happened, we miscalculated our expenses, had to change our budget multiple times, and we got discouraged. Since life isn’t perfect, there will never be a perfect process.

What matters is that you commit to progress, that you choose to readjust your course instead of abandoning the plan when things don’t go the way you had hoped. Like many things, paying off debt is about progress and not perfection. You will get there, and you won’t regret it.

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