
Are you starting the debt-free journey this year?
If you’ve answered yes: congratulations! Committing to the debt-free journey is a big decision. It won’t always be an easy journey, but I do believe it’s worth it.
I also think there are a few things you should know before you get started.
Things you need to know before starting the debt-free journey
Before making your first extra payment, here are four things I think you should know.
Know your why
Why do you want to be debt-free? Why do you think it’s important to pay off your debt?
Before you do any of the steps listed below, I believe it’s important to have an answer to those questions beyond “it’s what I’m supposed to do.”
Requirement or duty, especially when it comes to something not fun like paying off debt, is a poor motivator. Guilt’s not a great one, either. Your why should be something that provides positive motivation to move forward. Your why should help you understand how the act of paying off debt will bring you closer to your ideal version of your life.
Starting the debt-free journey with a very clear idea of why you want to be debt-free is important. It’s not an easy task, paying off debt. There will be times when you want to quit. Knowing your why will help you keep going.
Know your numbers
How much debt are you carrying? How much interest are you paying? What does your debt look like: credit cards? Student loans? Past due bills?
One of the very first things you need to do before starting the debt-free journey is get a clear picture of what your debt actually looks like.
The best way I have found to do this is simple: make a list.
Write down all your debts and the corresponding details. There are a lot of opinions out there about how to order this list — smallest to largest balance, highest to lowest interest rate — but I think the order is less important than getting it all down.
You can organize them however you like after.
Starting the debt-free journey with a clear picture of how much you actually owe will set you up for success.
Know your options
How will you pay off your debt?
Will you use the snowball method, which involves paying debts off from smallest to largest? Or are you thinking about using the debt avalanche, which aims to knock out high interest debt first?
Or maybe you want to do something completely different. Heaven knows there’s no shortage of options out there for debt repayment programs. This can be overwhelming at first, but it also opens the door for finding a plan that works for your individual situation.
There will be those who say their way is the only way to approach debt repayment but I don’t buy it. If that was true — if there really was a one-size-fits-all option — everyone would do it that way and succeed. That’s not the case, though.
Starting the debt-free journey with a plan that works for your individual situation will make it easier to gain and sustain momentum along the way.
Know you’re not alone
The debt-free journey can be lonely.
This is especially true when one considers there is still shame and stigma attached with debt. It sucks to know there are still so many who feel like they need to hide their financial problems from their friends and family. In many ways, this is still viewed as taboo.
But progress is being made.
One great example: the debt-free community on social media. The #debtfreecommunity hashtag has something like 750K+ mentions! There’s also a very active personal finance presence on Twitter, with people talking about everything from paying back debt, to saving, to investing.
If you’re starting the debt-free journey, I encourage you to look for opportunities to connect with others. You’re not alone. We’re out there.
Final Thoughts
Starting the debt-free journey is something to be proud of. It means you’re taking ownership of your financial situation and looking to improve it. That’s a good thing that will serve you well in the long run. Taking time to consider these four things can help set you up for success in the long term.
What’s your best tip for someone starting the debt-free journey?
Knowing your why is so important. Knowing why I was skipping meals out with friends, not buying new clothes or the latest iPhone was crucial in my ability to save enough money to go back to school and change careers. Then employing these same tactics helped me pay off my student loan after school and buy a house. Without knowing your why, it can be nearly impossible to remain on track and not give into temptation.
My only debt now is my mortgage, and I don’t currently have plans to pay it off ASAP, but I pay extra toward the principal every month to get rid of it sooner. I’ll be glad when it’s gone!
I find knowing the way is particularly important when it comes to paying back debt. Because uh lol paying back debt sucks. There’s no other way to put it. Knowing my why has definitely made a big difference in terms of staying motivated on the journey so far.
I think that’s a smart way to handle the mortgage — putting extra toward it with a goal of paying it off, but not stressing too much about it. When (if?) we ever buy a house, I anticipate we will take a similar approach!