Thousands of Reasons to Get Out of Debt

There is a huge advantage to get out of debt as fast as you can versus a slow and steady wins the race plan. Sure the slow and steady method allows you to still enjoy most of your current lifestyle; however, what your lifestyle costing you is probably going to shock you. So I am sorry to pop your bubble, but it needs to be done. There are literally thousands of dollars at risk if you do not learn how to get help with debt problems and explore some of your debt relief options. Let’s look at a fairly common example.

Jeff Smith earns $60,000 a year and has the average debt of about $54,000. (See debtclock.org to really freak yourself out.)

Assuming an average interest rate of 9% on the debt and allowing it to slowly get paid over 20 years Jeff is going to end up paying almost $63,000 in interest.  Ouch!  That is absolutely not the worst of it.  The payment to pay this debt off in 20 years was $485 a month.  If Jeff was completely debt free the $485 a month invested in a good mutual fund at an 8% return per year would be worth $285,000.  Yes, a quarter of a million dollars in your retirement account is traded for the joy of $50,000 in debt.  A healthy portion of this debt you probably can’t even remember what you accrued it for.

Get Real About With Your Debt

To get motivated you need to understand what a quarter of a million dollars would do for your life.  One, it would pay off most people’s mortgages in full.  That would be life changing.  If you are already debt free it will produce $12,500 a year in income for life without ever touching the principle, and most likely still growing.  Yes, you can now have an extra $1000 a month to spend on all the coffee, road trips, movies, snacks, or massages without ever lifting a finger.  (Ok maybe 1 finger to hit the send button from your retirement account to your checking account.)  Take this feeling of freedom and use it to propel you to a debt free life.  You need to fundamentally change your life to live without debt.  You must despise what debt is doing to your life that no amount of marketing, peer pressure, or just general greed will sway you.  The inner passion comes from a true knowledge that what you win with debt you lose in the future.

Time to Sacrifice

Take steps today to get on the path of being debt free.  Go sell something you like, but are not attached to and pay it on a bill.  Go ask for more hours at work or get the dreaded second job.  Cancel your Netflix and use the time to work on your new small business, plus send the $20 a month to one of your bills.  Your life has been a series of small decisions and a new series of small decisions will change the direction.  Just like being a good person or losing weight there is no one big hitter that will fix all your problems.  You need to choose the debt free path every time.

Cut the Safety Net

One of the big psychological breakthroughs in becoming debt free is deciding no matter what you will never choose debt again.  You might be saying it, but if you still have your emergency credit card in your wallet you aren’t ready.  If you are mentally incapable of separating yourself from the safety net you need to save up enough money in the bank to cover most of your emergency fund.  Then cut that card.  You won’t get really motivated until you do.  Dave Ramsey even has a whole segment to the destruction of the credit card.  It is quite entertaining to watch and seeing others do it may be helpful.

Get a Small Victory

Sometimes you just need a win to keep moving forward.  The goal is to get out of debt fast not get out of debt the most mathematically correct way.  By paying off that annoying $30 dollar medical bill that you don’t think you really owe so you ignored it, but it keeps getting in your face every month can be a huge mental boost to your debt free journey.