Everyday Cheapskate Mary Hunt: practices what she preaches when it comes to getting out of debt. She's been there--more than $100,000 in unsecured debt (not counting mortgage or car loans) that she and her family tackled without filing bankruptcy. For more information, check out her Debt Proof Living website.
"A new year, a clean slate. This is the year to get out of debt or stay out of debt. You are so determined you've decided that every dollar you can get your hands on will go straight to your credit-card debt. No one has ever gotten out of debt as fast as you're going to do it.
Your enthusiasm is commendable, but you need to take a deep breath. If you proceed with that kind of plan you will surely find yourself even deeper in debt this time next year.
There is a right way to get out of debt and your overzealous plan is not it.
Commit to reason. Anyone who's lost weight and kept it off knows the secret is slow, consistent loss -- not crash dieting. If you lose 10 pounds in a week, for sure you will replace it with 20. But lose a half pound a week, every week, and you'll keep it off. Same with paying down debt. You must do it methodically.
Get into balance. Spending all that you have from paycheck to paycheck is like trying to drive with a flat tire. Things are way out of balance. The way to create financial balance is to commit to three things: Giving, saving and living below your means.
Start giving. Giving away part of your income, even when you are deeply in debt, is the antidote for greed -- something we all deal with, simply because we live in such an abundant society. Giving is the ultimate thank-you note.
Create a safety net. If you send every available dollar (nickel, dime) to your credit card company so you have nothing in the bank, how will you manage to fix the refrigerator or pay for the new brakes? Stuff happens and if you are not prepared, you'll have no choice but to run to your credit cards for a bail out. The way you create your safety net is by saving some of your net income. Make that just as important as paying the rent or your mortgage.
Embrace frugality. Living on less than you earn is my definition of frugality. Living on 80 percent of your income may be a jolt to your system if you've been living on something closer to 120 percent. And that's what debt-proof living is all about. Decide right now that you will seek every possible way to stop spending so much money.
Dump your debt. Now you're ready to get debt-free in a reasonable and effective way. Get out all of your statements and pull together your debts. Add it all up and determine your pay-off plan. Follow my Rapid Debt-Repayment Plan® for a simple to use and understand plan. (See chapter 7 of my book, Debt-Proof Living and also a demonstration of the RDRP Calculator at the site above.)
Remember, we give, save and live frugally to make sure we can fund our lifestyles on the money we earn so we are not creating debt. Get it? Debt-proof!
Getting out of debt can be challenging work. But it's a lot easier if you do it in a reasonable way that is also effective. And permanent."
One of Hunt's money-saving tips for all of us is to stash all $5 bills in a savings jar. Many of us start by saving all of our change and when the jar is full, we cash it in. Hunt ups the ante by suggesting that every time you have a $5 bill in your wallet or purse, stash it. It's also important to think in advance what you're going to do with the money. Will you take it to the bank and put it in savings when it's $100? Is it a savings fund for the washing machine that might need repair or replacement soon?
If you've got a favorite way to save, share it. Getting out of debt seems to be a lot like dieting. Different methods work for different people but every person without debt has this common: spending less than you bring in.
